What Is the Reason Behind Nvidia’s Woes?

By Swati Kishore

Since October 2018, the price of the shares of the graphics processing units manufacturer Nvidia has declined by as much as 48%. As per speculations, SoftBank which had acquired USD 3 billion shares in Nvidia in 2017, is now planning to sell its stake.

Nvidia found new markets of crypto mining in 2017

After buying its stake in May 2017 through the Vision Fund, SoftBank had become the fourth largest shareholder of Nvidia. At the time, cryptocurrency miners were looking for ways to improve their machines; hence the chips manufactured by the California-based company found a new market.

However, the with the decline in the prices of most cryptocurrencies this year, the shares of Nvidia have also taken a hit. In August 2018, it was announced that the downward spiral in the crypto markets had forced the gaming chips manufacturers to re-evaluate its focus on the crypto mining industry.

Decreased demand for graphics processor units in 2018

Nvidia was adversely affected by the decreased demand for graphics processor unit or GPU mining chips. Interestingly, ASIC mining rigs performed better as they delivered more efficiency because they were specifically designed for crypto mining. The primary market for ASIC mining machines were large-scale crypto miners. Such mining operations can benefit from economies of scale.

In August 2018, Nvidia’s Chief Finance Officer Collette Kress was quoted as saying,

“Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”

Forecasting mistake is the reason for Nvidia’s Woes

As per CNBC Mad Money’s Jim Cramer, the reason for Nvidia’s woes is a forecasting mistake. He said that Nvidia makes the best graphics cards, and while it still leads in a lot of use cases, however, Intel is rivaling the company in self-driving vehicles, and AMD is also posing stiff competition to Nvidia in the data center.