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NVIDIA Suffers Crypto-Withdrawal, Dissapointing Earnings Call

Nvidia, one of the top GPU chip companies, is suffering from crypto-withdrawal. The company failed to adapt to the new panorama where GPUs are no longer in high demand from miners. This led to missing the last quarter forecast and to lower the current forecast. Nvidia’s stock also took a hit dropping 17%.

Nvidia Suffers from Crypto-Withdrawal

NVIDIA Suffers From Crypto-Withdrawal, Earnings Call Dissapointing
Nvidia, the top GPU manufacturer from the whole world admittedly suffers from crypto-withdrawal. This is what Jensen Huang showed during the latest earnings call yesterday. The company failed to deliver the forecasted results saying that cryptocurrency demand for GPUs had gone almost to zero.
The quarter numbers revealed an exacerbated number of chips in stock from the last generation (“Pascal”), directed to miners. But the cryptocurrency boom has already finished, due to the stagnant prices of cryptocurrencies. Also, the introduction of specialized cryptocurrency mining machines (ASICs) has slowed down demand.
Numbers were not so catastrophic, In fact, year to year revenue grew 21%, and the quarter to quarter revenue was up by 2 points. However, operating income decreased 9% from the last quarter. While Nvidia debuted its new line of GPUs this quarter, it seems that demand has not been so strong. Besides this, they have reported problems with the first batch of chips.

NVIDIA Failed To Adapt To The Moment

Jensen Huang declared that cryptocurrency had a lot to do with the results from this quarter. And also the forecast for the holiday quarter was lowered by this same situation. He stated:
“Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected. The crypto hangover lasted longer than we expected. We thought we had done a better job managing the cryptocurrency dynamics.”NVIDIA Suffers From Crypto-Withdrawal, Earnings Call Dissapointing
What this means is that a lot of cryptocurrency oriented cards produced are still in inventory. This can be explained in two ways. First, the demand for GPUs to mine cryptocurrencies dried up; and second, NVIDIA failed to adapt their cost structure to make this cards more enticing for gaming markets.
NVIDIA card prices were sky high due to miners buying GPUs to use them to mine cryptocurrencies. But as this demand dropped, NVIDIA did not lower the prices to keep inventory low and clear the way for their new GPUs. Now they could rebadge them (a commonly used technique) to clear them from inventories. This could make them focus in their new line of GPUs, that have had problems in its first batch.

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