Investors have mercilessly dumped Nvidia’s stock in the last quarter of 2018, knocking the stock price by 54 percent, making it the worst performer in the S&P 500 over that same period. Adding on the misery the stock fell 4.1 percent to $129.57 on Friday just before markets headed for Christmas weekend.
This has been the worst performing quarter for Nvidia in recent times as the stock was on the dramatic rise from early 2016 through September of this year and had lifted its market value from $14 billion to over $175 billion. This rise in market value was the result of skyrocketing demand for processors that could handle workloads for artificial intelligence and mining of cryptocurrencies.
But with the crash in Bitcoin prices this year, there’s been reduced demand for Nvidia’s graphics processing units to mine the currency. In November, Nvidia reported weaker-than-expected quarterly revenue and guidance.
“The crypto hangover has left the industry with excess inventory – excess channel inventory,”
Nvidia CEO Jensen Huang said on a conference call with analysts after the earnings report.
Although crypto was a major contributor to Nvidia’s decline, the problems were just not limited to it. The company’s data center segment, which includes sales to cloud providers like Amazon, also failed to meet Wall Street’s estimates, even though revenue grew 58 percent.
The drop in Nvidia has also pushed down the Semiconductor Sector Index having a domino effect on many other players as well. According to CNBC, The PHLX Semiconductor Sector Index, which consists of 30 companies including Nvidia, has dropped 19 percent, with Advanced Micro Devices plummeting 45 percent and Micron falling 33 percent.
Nvidia’s performance looks much weaker because of sentimental negativity as the stock is stuck in a broader collapse that has pushed down all the major indexes and has a particularly large impact on the stocks that led the bull market. The Nasdaq is down 21 percent for the quarter, on pace for its steepest drop since the fourth quarter of 2008, and the S&P 500 has tumbled 16 percent.
Nvidia’s this quarter performance does give a clear picture of how the drop in crypto prices has affected the mining industry. Well now as the floor is met and crypto prices are rising back we can expect Nvidia to rise back to its glory days and if it plans its strategy well Nvidia may surpass the best-performing stocks in quarters to come.
Will Nvidia rise back from its ashes land come out stronger in quarters to come? Do let us know your views on the same.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.