Why Nvidia Stock Dropped Monday

What happened

Shares of Nvidia (NVDA -0.78%) were trading down almost 3% after the market opened on Monday after Morgan Stanley warned investors of the potential slowdown in demand for graphics processing units (GPUs). As of 12:32 p.m. ET on Monday, the stock had rallied but was still down 1.4%, with the Nasdaq Compound down 0.4%.

Morgan Stanley believes EthereumThe planned move to a proof-of-stake model could slow demand for GPUs used to mine cryptocurrencies. This could impact short-term demand for Nvidia’s GeForce GPUs that have been used in crypto mining, although it’s unclear how much of Nvidia’s gaming revenue comes from the crypto market. -change.

So what

Nvidia has seen robust growth in its gaming segment over the past year. In the last quarter, gaming activity grew 31% year-over-year, accounting for nearly half of the company’s total revenue. Since 2018, Nvidia has decided to reduce the sales of its gaming GPUs to crypto miners with the release of cryptocurrency mining processors. But the company still doesn’t know exactly how much revenue comes from crypto-related sales.

On the fiscal first quarter earnings call, Chief Financial Officer Colette Kress said, “The extent to which cryptocurrency mining has contributed to gaming demand is difficult for us to quantify with any reasonable degree of accuracy. precision.”

Kress also mentioned that the reduced pace of Ethereum hash rate increase means it likely reflects lower mining activity on GPUs. Therefore, management expects a lower contribution from mining.

Now what

Nvidia could see a slowdown in gaming growth over the next year as it outpaces tough growth comparisons. Still, management estimates its gaming segment faces a $100 billion long-term addressable market, which offers plenty of room for more growth over the next decade. The gaming segment currently operates at an annual revenue rate of just $14 billion.

Comments are closed.