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Nvidia shares shed 18 per cent due to 'crypto hangover'

by Mark Tyson on 16 November 2018, 12:21

Tags: NVIDIA (NASDAQ:NVDA)

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Yesterday evening Nvidia announced its latest set of financials. The graphics chip designer headlined its quarterly results with pleasing figures; record revenue from data centre, pro visualisation, and automotive. It even raised the quarterly dividend by 7 per cent and announced its intention to return an additional $3 billion to shareholders in the coming year. However, in afterhours trading NVDA shares hit a low for the year, down 18 per cent at the time of writing, so what is the problem?

Above is the summary table and things look great for Nvidia. "AI is advancing at an incredible pace across the world, driving record revenues for our datacenter platforms," said CEO Jensen Huang in the results statement. "Our introduction of Turing GPUs is a giant leap for computer graphics and AI, bringing the magic of real-time ray tracing to games and the biggest generational performance improvements we have ever delivered."

Then Huang dropped the news behind the precipitous afterhours share price fall. "Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected." This news was compounded when he went on to forecast disappointing sales for the upcoming holiday quarter. As Reuters reports, Nvidia has to deal with "unsold chips piling up with distributors and retailers after the evaporation of the cryptocurrency mining boom". Looking closer at the inventory issue, it is revealed that provision for inventories expanded more than five-fold in the fiscal third quarter. Nvidia's Huang said that the new US tariffs were "not really a factor" in the way of remedying the inventory build-up.

Nvidia products bought by HEXUS readers will mostly be from its GeForce gaming line. As well as the bad news about inventory, Nvidia admitted that "gaming revenue was short of our expectations". Though it believes this will be corrected in one or two further quarters, recent industry murmurings say that its Turing cards are slow sellers. It is hard to know whether the Nvidia pricing strategy is designed to stifle GeForce RTX sales for now while it maintains prices for previous generation products.

On the topic of gaming, Gina Sanchez, CEO of investments strategy firm Chantico Global, spoke to CNBC and warned that "Nvidia's bread and butter is gaming, so they have to show continued positive growth in the gaming space". The big launch of the GeForce RTX series, the first gaming GPUs based on the Turing architecture, hasn't had the gaming industry impact Nvidia might have wished for, so far.



HEXUS Forums :: 11 Comments

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Crazy idea: why not make the old cards much cheeper and sell the new cards at the expected release prices? That way they could have shifted all the old stock to people with low/midrange budgets and gained market share by destroying AMD sales, and still sold more of the new cards. Sure you “could” get more for them but they're actually just gathering dust. Did they really think people would buy a years old card at near its original release price or not wait for the obviously over priced new range with as yet unsupported features to come down in price?
EN1R0PY
Crazy idea: why not make the old cards much cheeper and sell the new cards at the expected release prices? That way they could have shifted all the old stock to people with low/midrange budgets and gained market share by destroying AMD sales, and still sold more of the new cards. Sure you “could” get more for them but they're actually just gathering dust. Did they really think people would buy a years old card at near its original release price or not wait for the obviously over priced new range with as yet unsupported features to come down in price?

I think Nvidia are tacitly trying to signal AMD and Intel to follow their lead price wise when they release cards next year and 2020. Graphics card prices might end up like the smart phone market.. Whether they succeed or not is another question. Or maybe they are just price gouging as much as possible while they can, until significant competition arrives next year/2020 and prices become more reasonable again. I hope the latter.
Because they can keep prices high. Simple as
3dcandy
Because they can keep prices high. Simple as

Doesn't that contradict this news, which shows they can't?
kalniel
Doesn't that contradict this news, which shows they can't?

I'm generalising. They've tried to keep prices high cos they could but it appears to have backfired a bit…