As excess stocks of mining-focused graphics cards and chips pile up in NVIDIA’s unused inventory, the chip giant from Santa Clara, California, is left with no choice but to tone down its ambitions for the once-thriving currency mining market.
The company is currently readjusting its development and production strategy for mining-focused products in the wake of dwindling demand. For NVIDIA, it’s a lesson learned the hard way: always tread carefully when engaging in the cryptocurrency market, no matter how rewarding the prospects may appear from a distance.
Supply Let Down by Demand
NVIDIA says it was anticipating around $100 million in revenue in Q2 2018 from the sales of its high-end mining-compatible chips. In stark contrast to that expectation, the company could not even hit the $20 million mark as the mining industry is set on a downward spiral caused by a variety of reasons, including, of course, increasing competition and a bearish crypto market with no signs of immediate recovery.
Worse still, the company doesn’t see the status quo improving anytime soon. It says revenue from the sales of mining-compatible products could disappear altogether in the foreseeable future.
Fortunately for the chip maker, it is a giant corporation perfectly capable of navigating such precarious positions and moving on relatively unharmed. But even then, a sales figure of less than 20 percent of the anticipated amount is sure to leave some impact, and it definitely won’t be just a bruised ego.
Investors are already finding it hard to swallow that what was appearing to be a billion-dollar business opportunity until only recently has crashed within a matter of just a few weeks. In fact, it was only last quarter when NVIDIA generated about $290 million in revenue from the currency mining industry.
What’s Next Then?
Even though the cryptocurrency mining industry helped NVIDIA with short bursts of massive spikes in revenue and market value, the company cannot go on trying to feel at home in this relatively new and unpredictable market. Any further attempt to tap in on the mining industry could backfire, given that NVIDIA is unlikely to beat the dominant forces at play in this highly saturated market.
For example, smaller but already established mining rig firms such as Bitmain produces ASIC miners, which can mine a lot more efficiently compared to even the best of NVIDIA cards.
Instead, it will probably be worthwhile for the company to continue building upon its core strengths, which includes cash-rich and fast-evolving domains such as PC gaming, data-processing services, and artificial intelligence. NVIDIA founder and CEO Jensen Huang explained:
“Our core platforms exceeded our expectations, even as crypto largely disappeared. [….] We’re projecting no crypto mining going forward.”
NVIDIA’s Core Business Is Doing Just Fine
Despite the debacle in the currency mining market, NVIDIA’s net sales marginally exceeded market expectations to hit $3.12 billion in the period ending July 29, 2018.
CEO Huang announced the financial results for the second quarter of fiscal 2019 earlier last week. And to the joy of shareholders, the company reported an impressive 52-percent spike in gaming sales, which took the tally all the way up to $1.8 billion. Data center revenue also grew considerably (83 percent) to reach $760 million.
The chip giant reports a net profit of $1.1 billion in Q2, pushing its shares to $1.76 as compared to 92 cents during the same quarter last year.