Nvidia shares hit by crypto collapse

NVIDIA Corp (All Sessions) shares may have been hit by the recent sell-off in cryptocurrencies, as well as the wider rout in technology stocks.

Shares in the graphics card and chipmaker have dipped in the last few days by 10% from around $172 to $155.42. The share price fall comes amid the recent plunge in cryptocurrencies.

Nvidia’s gaming graphics cards have become popular among cryptocurrency miners as they are used in the systems which produce the digital coins. These have previously exchanged hands for top dollar. However, as crypto prices have slumped, the price of these cards has also fallen dramatically as demand has dipped.

“People don’t want to buy GPUs knowing it’s potentially going to be obsolete in two quarters,” Tristan Gerra, an analyst at Robert W. Baird & Co, told Bloomberg. “We believe that crypto-related purchases have steadily declined.”

Nvidia’s crypto revenue a ‘black hole’

Indeed, some analysts estimate that over a third of the consumer graphics card market could be wiped out as crypto miners dump the technology. However, Gerra sees this area as a revenue “black hole” for Nvidia that is best cleared up, making it easier for the company to forecast future demand for its products.

Crypto-related sales have been a double-edged sword. In 2018, the company warned investors that revenues would be hit by a fall in the cryptocurrency market. The US Securities and Exchange Commission deemed that Nvidia had failed to point out to investors the importance of crypto-mining to sales of its GPUs and, as such, the company was fined $5.5 million in May.

Indeed, the company’s management is trying to move away from this unpredictable revenue stream.

Nvidia’s softer outlook guidance

Nvidia’s share price performed strongly last year – a winner during the pandemic - yet has struggled this year. This has been despite delivering strong figures and returning $2.1 billion to shareholders in 2022. The company plans to return a total of $15 billion to investors this year and posted record first-quarter revenues in May.

The shares are down 22% over the past 12 months to $155.42 and have fallen 55% since hitting a three-year high of $346.47 last November.

The general flight from technology stocks is one factor. However, Nvidia’s outlook statement at the first-quarter results in May warned of a number of issues affecting the company. The Covid lockdowns in China are reducing demand for its products, with whole cities across the country entirely shut down. What’s more, the company’s withdrawal from the Russian market will dampen sales by $500 million.

The company’s second-quarter results are due on 24th August, which could provide a boost. Long-term the shares are worth buying. However, investors may continue to be in for a rough ride in the short term as technology stocks remain out of favour for now.

Take a look at Axel Rudolph's recent technical analysis of the shares.