We see Nvidia's CMP GPU sales are crashing, and general "gaming" revenues have declined by 33% YoY. Bitcoin and other digital assets rely more on ASIC miners over GPUs. What We Are Left With NowĮthereum is moving away from GPU mining. We can presume that this dynamic occurred partially due to the substantial demand from the cryptocurrency segment. Naturally, this phenomenon significantly contributed to the company's skyrocketing revenues. Due to the GPU shortage, Nvidia's graphic cards could sell for two times MSRP or higher in many cases throughout this time frame.
You'd be lucky to get a quality GPU at MSRP in 2020/2021. On the contrary, as we advance, there will probably be a remarkably high number of unneeded GPUs.Īnother reason why Nvidia's revenues spiked so rapidly was the GPU shortage. Therefore, the Ethereum network will not need a growing number of GPUs. Proof-of-stake is far less intensive and requires nothing near the computing power of proof-of-work. However, Ethereum is moving away from intensive GPU mining, and the switch from proof-of-work to the proof-of-stake protocol should be complete soon.
#Nvda premarket driver#
Ethereum has been the driver of cryptocurrency-related mining GPU sales in recent years. The massive problem Nvidia faces now is Ethereum's pivot away from GPU mining. While the company has a CMP GPU line dedicated to cryptocurrency mining, some of its gaming GPUs also went to cryptocurrency miners. Nvidia's cryptocurrency mining processor ("CMP") sales were down by 66% YoY to just $140 million last quarter. However, now the company is reporting sharp drops in sales. When we look at Nvidia's surging sales in 2020/2021, this time frame coincides with the significant bull market in Ethereum and other digital assets. Nvidia's revenues benefited greatly from surging Ethereum and other cryptocurrency-related sales. However, we know that Nvidia's GPUs were widely used in Ethereum and other cryptocurrency mining, but sadly for the company, these sales are ending. Unfortunately, we cannot know precisely how much of the GPU sales were cryptocurrency related as the company did not disclose the numbers. However, earlier this year, Nvidia settled with the SEC for failing to disclose its cryptocurrency-related sales.Ī significant portion of Nvidia's GPU sales went towards cryptocurrency mining. However, what was the true catalyst behind this move? The company claimed that it benefited from surging gaming-related revenues. The insatiable demand pushed the stock to grossly overbought and ludicrously overvalued levels (roughly 40 times trailing sales). The company's revenues surged by 40-60% or more in many quarters in 2020/2021, and investors loved its performance and stock. Then, Nvidia received a post-coronavirus recovery boost as well. Nvidia weathered the coronavirus slow down better than many other companies as much of its gaming business is related to gaming. So, what occurred in this time frame? Why did we see such remarkable demand for Nvidia stock? So, we see that before the recent decline phase Nvidia skyrocketed by nearly 10X in just around two years. This is only a three-year chart of Nvidia. The Bubble Days Are Over - More Downside Ahead Meanwhile, the stock should attempt to find a base, but a reasonable entry price may be around $100-120. Therefore, we will probably see earnings estimates and EPS decrease more than anticipated.
The company faces several challenging headwinds to its top line, and its bottom line may continue deteriorating in the coming quarters. The company has entered a severe decline phase, and the market is probably underestimating how serious the situation is for Nvidia. Nvidia is not only suffering from overvaluation problems and a challenging macroeconomic backdrop. Moreover, the company's guidance was disappointing. Nvidia reported earnings in line with its preannounced figures but well below prior guidance and analysts' estimates. However, despite being one of the most shockingly overvalued stocks of its time, Nvidia's problems run much deeper than the typical temporary overvalued company. I warned about the " Epic Drop" in my late-November article, and one of my prime examples of the coming crash was Nvidia. Then, the Fed pricked the ultra-high multiple bubble, and many stocks, including Nvidia, crashed. During this bubble phase, Nvidia's stock hit an all-time high of around $350, trading at more than 100 times TTM non-GAAP EPS (approximately 40 times TTM sales). NVIDIA Corporation's ( NASDAQ: NVDA) market cap reached an absurd high of more than $800 billion during the tech-top in November 2021.