As it happens with most markets around the world, the one for technology companies depends on numerous variables that can change through time. And Nvidia, being such a firm, relies on news and developments in other fronts to achieve a higher number of sales and the highest possible profit.
Since Nvidia designs graphics processing units (GPUs,) mainly for gaming and professional markets, but also for cryptocurrency mining, it is natural that a portion of its sales comes from the commercialization of mining-related equipment. And, since the crypto market has been on a downturn (or volatile, for a more accurate term) for months, interest in buying such gadgets has been decreasing.
Nvidia, therefore, explained this week in its report from Q4 (fourth quarter) that the recent decrease in sales to crypto miners fueled a “disappointing” last period, which is not surprising considering the bearish conditions that have surrounded the market for several weeks now.
At the time of writing this piece, Bitcoin (the world’s most popular digital asset) was trading at $3,620.54, up 0.03% in the last 24 hours. However, the number is a far cry from its January 2018’s value (almost $20,000) and even from last November (approximately $6,500) and the markets have shown few signs of a short-term recovery. Those conditions have likely pushed miners away and diminished their interest in acquiring related equipment, since they do not see the activity as profitable at the moment.
A 24 Percent Decrease
The report for the fourth quarter was made public on Thursday, February 14. The period ended on January 27th, and Nvidia informed that its revenue for the Q4 was $2.21 billion, a 24% decrease from last year’s Q4 ($2.91 billion,) and down 31% when compared to the $3.18 billion that it produced in the previous period.
According to Nvidia, the company is struggling to find a way to sell an excess of inventory as a result of the crypto market “snooze.” The conditions have been so harsh that the company has been forced to lower its prices for crypto equipment in an effort to achieve sales.
The firm’s founder and Chief Executive Officer, Jensen Huang, explained that “this was a turbulent close to what had been a great year. The combination of post-crypto excess channel inventory and recent deteriorating end-market conditions drove a disappointing quarter.”
Clearing the Excess of Inventory
Last week, Nvidia’s Executive Vice-President and Chief Financial Officer Colette Kress observed that the problem has resulted in reduced shipments, with the intention of letting excess inventory to be cleared from the shelves via sales. According to Nvidia’s forecast, the situation is expected to revert back to normal during Q1.
The numbers for the last full year were also made available in Thursday’s report. Despite the inventory issues, Nvidia made a record revenue of $11.72 billion, which represents a solid 21% increase over the last such period. The gaming, datacenter, professional visualization and automotive areas achieved record annual revenues.
“Despite this setback, NVIDIA’s fundamental position and the markets we serve are strong. The accelerated computing platform we pioneered is central to some of world’s most important and fastest growing industries – from artificial intelligence to autonomous vehicles to robotics. We fully expect to return to sustained growth,” Huang stated.
By Andres Chavez
