Nvidia stock falls in revenue
Late Thursday on 15th Nov 2018, Santa Clara-based graphics chip maker, Nvidia corporation, popularly known as “nVidia”, missed out in Wall Street’s target in its sales as shown in its recently released third quarter earnings. Decrease in crypto mining as virtual currency markets declined early in the year was said to have affected the firm’s revenue. More than five percent decline was recorded in the firm’s shares. The third quarter revenue stated income amounts between $3.19 billion and $3.24 billion which appears less than the $3.34 billion as predicted by various analysts. Nvidia’s shares recorded a decline of about 18 percent as at last week Friday.
Advanced Micro Devices or GPU
A close competitor of nVidia, Advanced Micro Devices popularly known as AMD, also released its earnings for the third quarter of the year in late October. AMD also missed out in Wall Street’s target in terms of revenue. Technically, it seems like nVidia is not the only firm facing shortage in revenue expectations this year. AMD had also recorded a 3.9 percent decline in shares this year. Facebook, Amazon, Netflix, Apple and some other tech giants also recorded about 3 percent decline in the stock market.
In the fiscal third quarter, Nvidia has benefited a lot from the cryptocurrency boom last year. Digital currency miners depended on nvidia graphics card for their mining. This helped nvidia a lot. Revenue level rose with increased purchase of their graphics card. Further increase was recorded when bitcoin rose to about $20000 last year and ethereum to about 9000 percent. Earlier in the year, sales of graphics card increased the firm’s stock and it was able to exceed Wall Street’s target.
Why Nvidia stock falls in revenue
According to some recent analysis by Susquehanna, mining with graphics processing unit has become less profitable for most miners. Mining of cryptocurrency requires the use of high end computers, powered by strong graphics card, to solve complex mathematical problems and algorithms in exchange for a specific digital currency (like bitcoin or ethereum).
As digital currency prices fell this year, revenue level from crypto have declined drastically. Revenue from gaming, which is the largest segment of nvidia revenue, also fell below expectations of $1.89 billion estimate to about $1.76 billion. Data center segment for nvidia was reported to be about $792 million in revenue which is lower compared to its $821 million estimate. Also, revenue from profession visualization business segment was reported to be about $305 million which exceeded the $284 million estimate.
Various analysts indicated that excessive inventory might become a temporary problem and investors might become frustrated. President and CEO of nVidia, Jensen Huang, told analysts after the release of the earnings report that the issue was further compounded by the firm’s surplus inventory which contributed to decreased guidance in the coming quarter. “Our fourth quarter for gaming reflects very little shipment in the midrange Pascal segment to allow channel inventory to normalize.”
Nvidia’s chief financial officer, Colette Kress told analysts. “It will take one to two quarters to go through extra inventory. This is surely a setback, I wish we had seen it earlier.” Jensen Huang said. However, further indications have shown that nvidia might still disappoint Wall Street in the coming weeks.