Earlier this week, the graphics chip monolith Nvidia
Nvidia CEO and co-founder Jensen Huang noted that a higher-than-expected chip inventory led to the unfortunate decline in stock price, and further suggested that the current state of the cryptocurrency market was to blame. Although Nvidia had anticipated a decline in stock price due to waning chip demand, he stated that the "crypto hangover lasted longer than we expected" in a call following the earnings report.
While demand for cryptocurrency in late 2017 was particularly strong, the prices for the software (along with Bitcoin) dipped as mining lost profitability. For mining, computers compete against other machines to solve complex math problems. A predetermined amount of Bitcoin or Ethereum is awarded to the first computer or group of computers that solves the problem. Over the course of 2018, however, mining for Ethereum in particular using Nvidia's flagship graphics card, GPU, is no longer advantageous according to analysts. In addition, chips used for cryptocurrency are currently being re-sold on secondary markets - which further contributes to the high inventory Nvidia is experiencing.
Concerning estimates for fourth quarter earnings, Jensen Huang offered a gloomy outlook, stating that although Nvidia "had previously anticipated cryptocurrency to be meaningful for the year, [they] are now projecting no contributions going forward." The company expects to bring in a revenue of $2.7 billion, which is far below analysts' estimates of $3.4 billion. Revenues are expected to suffer a critical slump towards the end of this year given that Nvidia's gaming materials - crucial to the mining process as well as Nvidia's earnings - develop on a year by year basis.
Competitor Advanced Micro Devices
