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Nvidia is about to announce lower quarterly results. Indeed, the fall in the price of cryptocurrencies sharply reduced the demand for graphics cards during the second quarter.
Nvidia has just warned its shareholders. Ahead of the publication of its final quarterly results, the American company predicts a 19% drop in its turnover. Nvidia expects sales of around $6.70 billion for the second quarter, far from the $8.10 billion anticipated by the market.
With this warning, Nvidia seeks to prepare investors for the announcement of its final financial results, which will take place on August 24, 2022. The warning has been poorly received by financial markets. NVDA’s stock price has contracted more than 6% in the space of 24 hours.
GPU demand is down due to cryptocurrency miners
Nvidia attributes the decline in its turnover to the results of its video game activity, which includes graphics cards. GPU demand is visibly weaker than in previous quarters, marked by a chronic shortage. Partners like Evga, MSI, Asus, Zotac and Gigabyte ordered significantly fewer graphics cards during the period. Nvidia did not expect GPU demand to shrink so quickly, the statement suggests.
“While we expect the macroeconomic conditions affecting the sale to continue, we have taken steps with our gaming partners to adjust channel prices and inventory,” said Jensen Huang, the boss of Nvidia, auguring a further price reduction.
Nvidia’s video game division reported preliminary revenue of $2.04 billion in the second quarter, down 44% in three months. The division’s “sales projections” were significantly lowered during the period, notes Jensen Huang.
The collapse in GPU demand is a direct result of the cryptocurrency crash. Since May, the crypto-asset market has been in the red. Bitcoin crashed around $23,000 causing all digital assets to fall.
In this complicated context, cryptocurrency mining centers, including Ethereum, are recording a drop in their profitability. Ultimately, miners no longer invest in new graphics cards. However, crypto-miners have always had a significant impact on the demand for GPUs. In the space of 18 months, miners injected $15 billion into the graphics card market.
Faced with the fall in the price of cryptocurrencies, many of them are reselling their mining machines on second-hand sites at bargain prices. Buyers then turn to the second-hand market, to the detriment of new graphics cards. This isn’t the first time the cryptocurrency industry has penalized Nvidia’s revenue. In 2018, the decline of Bitcoin and other currencies had already weighed on the firm’s financial results. The company had found itself with a stock of unsold GPUs on its hands.
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