GPU Maker Nvidia Fights to Overcome Crypto Market Shenanigans

GPU maker, Nvidia, is mulling over moves to make to avoid being negatively impacted by the crypto industry.
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GPU Maker Nvidia is fighting to overcome crypto market upheavals after the sector suppressed its sales growth figures. The industry has also impacted the company’s stock prices which fell by over 25 percent between November 15 and 19.

Shares of the GPU juggernaut came under pressure following a major crypto market slump. The abrupt change spooked investors who rushed to dump stocks of companies involved in crypto. On November 15, Nvidia share prices tumbled 15 percent during after-hours trading in concert with the crypto industry plunge.

The dip occurred moments after Nvidia published its third-quarter fiscal report, which revealed revenues ended Oct. 28, 2018 reached $3.18 billion. This was a 21 percent increase compared to the $2.64 billion in revenue achieved within the same period last year.

The sharp downturn that occurred in November was caused by an unprecedented crypto market decline that saw many digital coins lose over 80 percent of their value.

Diminishing crypto mining returns caused demand for GPU units to plummet and this in turn affected Nvidia earnings. Graphics Processing Units from companies such as Nvidia and AMD are used by some crypto enthusiasts to mine digital currency and so demand is expected to stay low as current market conditions prevail.

Nvidia had predicted a decline in GPU sales in its August report.

Changing Fortunes

Towards the end of 2017 and at the beginning of the year, GPU manufacturing companies such as Nvidia saw demand soar after crypto prices rose sharply. Bitcoin’s value peaked at $19,650 and a crypto fever ensued causing an escalation in orders for high-end GPUs for mining purposes. Firms such as Nvidia soon found themselves grappling with inventory issues as demand fast outstripped supply.

Unfortunately, the steep market decline that occurred in March caused demand for GPUs to contract. Conditions were further aggravated by rising hashrates which caused old GPUs to lose value. By this time, GPU companies had already ramped up supplies to meet the initial demand and this subsequently caused oversupply problems.

Distributors and retailers were now stuck with inventory that could soon become obsolete as crypto mining and gaming hardware requirements heightened. This scenario was also outlined in Nvidia’s third-quarter report.

The Company’s Outlook

According to CEO Jensen Huang, Nvidia had initially miscalculated demand trends but expects users who had previously been priced out by the cryptocurrency frenzy will be lured back by the more fairly priced products.

This would provide some buoyancy to declining sales. However, the hangover caused by the crypto market seems to be taking longer than expected. According to its latest statement, the company expects inventories to normalize by the end of the fourth quarter.

Nvidia has so far profited immensely from its Artificial Intelligence datacenter platforms, and its revenue outlook currently stands at approximately $2.7 billion.

Its year-over-year double-digit growth figures suggest that the company has to a large extent been able to overcome pressure from the crypto mining sector, although the fourth quarter guidance seems a bit disappointing to investors. That said, diversifying its portfolio is likely to shrug off cryptocurrency sector shenanigans in the long run.

Other Companies Connected to the Crypto Industry Were Affected

Other companies that are remotely connected to the cryptocurrency industry were also affected by the recent crypto market slide that occurred in November.

Nvidia’s rival, Advanced Micro Devices (AMD), for example, had its shares sink by 3.2 percent on November 16, just 24 hours after the crypto market turned red. Over 50 million AMD shares were dealt during this time, putting the company in second place among the most traded companies.

Nvidia rival, Advanced Micro Devices (AMD), for example, also had its shares sink to 3.2 percent on November 16.
Both Nvidia and AMD benefited greatly from the crypto mania that occurred towards the end of 2017.(Image Credit: AMD)

Both Nvidia and AMD benefited greatly from the crypto mania that occurred towards the end of 2017.

Hard Times for Crypto Mining Hardware Makers

The bearish crypto market has forced many cryptocurrency mining and hardware manufacturing companies to undertake mass layoffs and declare bankruptcy. GMO, a major crypto mining company based in Tokyo, Japan, is among the latest casualties.

The tech company announced on Tuesday that it would be closing shop due to increased competition in the mining segment, and the bearish market, which has greatly diminished profitability thereby rendering its projects unsustainable.

According to the company statement, the tech giant incurred losses of approximately 38 billion Yen, which is around $343 million dollars, due to the unpredictable nature of the sector. The company outlined that it will no longer be able develop-crypto mining machines or sell miners.

Right now, there are rumors that Bitmain, the largest ASIC manufacturer in the world plans to cut costs by laying off over 50 percent of its staff. Reports cite an unprofitable run exacerbated by the purchase of a huge Bitcoin Cash stash whose value shrunk by lost 1,500 percent within the past twelve months.

According to a report published by Bitmex, Bitmain sustained losses in excess of $300 million as a result, and this has affected its cash flow. Its pending IPO approval is also dogged by the overall negative investor and regulator sentiment due to market upheavals.

Unlike Nvidia which is a world leader in the gaming GPU market, companies that specialize in crypto hardware will find it particularly hard to weather the currently difficult market situation.

(Featured Image Credit: Nvidia)

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