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By most measures,
Nvidia
showed that he had a good year when he released the results on Wednesday. But with semiconductor companies benefiting from an increase in demand for fewer chips, investors are demanding unblemished excellence.
Sure, Nvidia’s stock (ticker: NVDA) fell 8% on Thursday, while Wall Street struggled to find out how the company’s results matched a stock trade at a high profit estimate 41 times higher for the next 12 months.
Jefferies semiconductor analyst Mark Lipacis attributed the stock’s weakness to the company’s steady growth over the previous quarter in its data center business, coupled with the bad memories of Nvidia investors about the volatility of the Bitcoin trade.
In recent years, graphics cards with Nvidia chips – and traditionally designed for video games – have become popular on machines used to mine bitcoins and other cryptocurrencies.
In its data center segment, Nvidia reported impressive growth compared to the prior year period, nearly doubling fiscal fourth quarter sales to $ 1.9 billion. Nvidia CFO Colette Kress said that sales growth was driven by Nvidia’s new graphics processing unit, or GPU, architecture, along with the acquisition of the company Mellanox.
Data center sales were flat, however, compared to the third quarter.
“Stable growth compared to the previous quarter was disappointing for high P / E inventory and fell short of higher purchase expectations,” wrote Lipacis. “We noticed that processor data center spending recently exhibited periods of growth above the trend line followed by digestion periods, and that the data center is now in a digestion period.”
Lipacis wrote that those moments in the past proved to be buying opportunities. “Most importantly, the last time NVDA was sold during a data center digestion period was in 4Q18-1Q19, which proved to be an opportune time to buy the shares,” wrote Lipacis.
In terms of cryptocurrencies, investors seem concerned that Nvidia’s recent results have been driven by Bitcoin’s latest high, which recently surpassed the $ 50,000 level. But previous crypto rallies have proved problematic for Nvidia. When prices in digital currencies fell rapidly in 2018, miners quickly sold their graphics cards. The flood of cheap cards hurt Nvidia’s revenue and left it with significant inventory.
Lipacis notes that, in the fourth quarter of that year, sales in Nvidia’s video game segment fell to $ 954 million from $ 1.76 billion in the previous quarter. The shares fell from $ 292 to about $ 124 in three months, he wrote.
Nvidia has taken steps to address the problem – driven by the popularity and performance of its new Ampere-based graphics chips.
Last week, Nvidia announced a specialized line of products for cryptocurrency miners, estimating that sales of these units would total $ 50 million in the first fiscal quarter, which ends in April. The company is also limiting the mining resources of its low-cost graphics chips and RTX 3060 cards, forcing cryptographic miners to pay for more expensive cards.
CFO Colette Kress said in the conference call that the company has no way of determining what buyers do with its current catalog of graphics chips.
Write to Max A. Cherney at [email protected]