'Post-Crypto Hangover' Leaves Nvidia With Unsold Graphics Cards

Cornelia Mascio
Novembre 17, 2018

Shares plunged almost 17 percent in late trading. As the frenzy receded and card prices came down, Nivida expected sales volumes to grow again as buyers who were priced out came back.

Echoing Huang's assertion on the quarterly results, analyst Patrick Moorhead said that Nvidia's lower-than-expected revenues represented "a short-term blip that will be quickly corrected". "And that took longer than we expected, frankly". "We thought we had done a better job managing the cryptocurrency dynamics", he later added.

As a result, Nvidia stopped shipping some of its mid-priced chips to retailers, where they are stacking up in warehouses and the backs of stores.

Nvidia's provision for inventories reportedly increased to $70 million in Q3 2018, and the company stated that the same provision had increased over three times during the first nine months of its financial year (FY) to $124 million.

The provisions for inventory lowered Nvidia's gross margins by 1.8 percentage points in the quarter to 60.4 percent, though margins were still up from 59.5 percent a year earlier.

The unsold graphics cards led Nvidia to miss its original revenue projections for the third quarter, which came in at $3.18 billion, down from the forecasted $3.25 billion.

Technology stocks fell more than the rest of the market in early trading Friday.

Chan said demand was faltering for Nvidia's chips in data centres. "During the quarter, we launched new platforms to extend our architecture into new growth markets-RAPIDS for machine learning, RTX Server for film rendering, and the T4 Cloud GPU for hyperscale and cloud", Huang said.

The ongoing US-China trade conflict may have adversely affected Nvidia's business, according to analysts. Tariffs on many Chinese-made goods will rise to 25 percent starting January 1.

Nvidia's inventory build-up is suggesting that the escalating tariffs have started to pinch producers.

Last month, rival Advanced Micro Devices Inc blamed dwindling demand for chips from cryptocurrency miners for its lower-than-expected fourth-quarter revenue forecast.

Nordstrom was the biggest decliner on the S&P discretionary index (.SPLRCD), which fell 1.1 percent.

Revenue from Nvidia's closely watched data centre chips business rose 58 per cent to $792 million, but missed analysts' estimate of $820.4 million.

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