I wrote this 2 months ago and posted it here. I predicted the bad quarter. I wonder why Wallstreet didn't?
https://www.reddit.com/r/stocks/comments/vb52k4/during_the_crypto_crash_in_2018_nvidia_had_4/
———–Original post below———–
- -24% in Q1 2019
- -30% in Q2 2019
- -17% in Q3 2019
- -5% in Q4 2019
Nvidia's stock price dropped by about 53% during this period. It didn't recover until the pandemic-fueled boom.
This is because when crypto crashes, miners will flood the market with used GPUs, giving bargain prices to gamers. MSRP prices for gaming GPUs doubled during the boom. What happens when GPU prices drop to half of MSRP?
In the last 3 months, ETH mining profitability has dropped by 50%. 70% in the last 6 months. This doesn't even account for electricity cost inflation.
ETH itself is down 30% in the last 7 days.
Nvidia does not break out its gaming and crypto sales. (Comment: Nvidia “gaming” revenue fell short by $1b) They lump both categories into their gaming sales category. Therefore, no one can reliably model the impact. But if I have to guess, it won't be as bad as 2018 if crypto does not go back up because Nvidia's overall revenue has diversified a bit since 2018.
However, 2018 is very different than 2022 for Nvidia. In 2018, Nvidia only faced the crypto crash. In 2022, Nvidia faces a triple whammy: recession-risk (GPUs are a non-essential good and expensive), people going outside more (less gaming), and crypto crash (mining). While some companies are facing one or two of these issues, very few are impacted by all three.
Like most tech companies during the pandemic-boom, Nvidia also hired a ton of workers and started projects that don't either don't make any money or loses money. Nvidia's employee count went from ~13,000 to ~22,000 from 2020 to 2022.
The question is, is Wallstreet ready for negative Nvidia revenue growth? Do you think Wallstreet has already priced this in? Right now, Nvidia's PE is still at a premium over the market. What happens when its growth is negative for 4 quarters?
Long term, I still believe in Nvidia. But watch out in the next 1-2 years.
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