Nvidia Gives Lackluster Outlook on Cratering Crypto Sales

A greater-than-expected drop in sales to cryptocurrency miners drove Nvidia to forecast lower current-quarter revenue than analysts expected•But revenue from sales to data center operators grew 83 percent in the chipmaker’s last fiscal quarter, Bloomberg reported•While data center chips now account for a fifth of Nvidia’s revenue, it generates most of its income in the gaming market


August 17, 2018

3 Min Read
Jensen Huang, CEO and founder, Nvidia, speaking at GTC Summit 2018
Jensen Huang, CEO and founder, Nvidia, speaking at GTC Summit 2018Yevgeniy Sverdlik

Ian King (Bloomberg) -- Nvidia Corp., the biggest maker of graphics processors, gave a disappointing forecast and said a greater-than-expected drop in demand for chips used by cryptocurrency miners put a lid on sales growth. Shares fell about 4 percent in extended trading.

Revenue in the fiscal third quarter will be $3.25 billion, plus or minus 2 percent, the Santa Clara, California-based company said Thursday in a statement. That would fall short of analysts’ average estimate of $3.35 billion, according to data compiled by Bloomberg.

The mining of cryptocurrency tokens such as Bitcoin, computer code that carries value in online transactions, had helped stoke demand for graphics chips. These types of processors excel at making multiple small calculations at the same time, the type of capability that’s well-suited for cryptotoken creation. These graphics chips had been in short supply and prices had risen for their main users, gamers.

Nvidia said it had expected about $100 million in sales of chips bought by currency miners in the fiscal second quarter. Instead, the total was $18 million and the company projects no revenue from those customers in the future.

Investors are expressing their concern at the sudden collapse of what had looked like a billion-dollar business. Three months ago, Nvidia said it generated $289 million in sales from cryptocurrency miners in the fiscal first quarter, but warned that demand was declining rapidly and might fall by as much as two-thirds. Even that prediction was too high.

Related:Nvidia Data Center Chief: On-Prem GPU Deployments for AI Rising

Nvidia founder and Chief Executive Officer Jensen Huang is reshaping his company to take advantage of trends that are changing computing. He has convinced owners of data centers that modified graphics chips are the best solution to handle the surge in artificial intelligence processing that is fueling the growing use of voice and image recognition.

Earlier this week, Huang unveiled a new more powerful chip architecture that he said will help Nvidia gain more share in computer intensive industries such as movie special effects and automotive design. Turing, as it’s called, will also make its way into gamer- and data-center chips.

While data-center chips now account for a fifth of company revenue and are increasingly a driver of overall growth, persuading gamers they need the latest Nvidia GeForce graphics chips to make their experience ever more realistic remains the company’s main source of income. The prospect of the new design coming later this year may be causing some to hold off on purchases of its predecessor.

Related:Nvidia Shrinks the Deep Learning Data Center

Still, Nvidia reported that sales from gaming rose 52 percent to $1.8 billion in the quarter ended July 29. Data-center revenue increased 83 percent to $760 million. Both areas topped analysts’ estimates.

Nvidia had a profit of $1.1 billion, or $1.76 a share, in the fiscal second quarter, compared with $583 million, or 92 cents, in the same period a year earlier. Revenue surged to a record of $3.12 billion. Analysts estimated $3.11 billion.

With the quarter’s results, Nvidia revenue is on course to more than double from 2016. Investors have been attracted to the stock, pushing shares up 33 percent this year compared with a 6.4 percent advance by the Philadelphia Stock Exchange Semiconductor Index. It’s the second-best performer on the index in 2018 behind rival Advanced Micro Devices Inc.

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