An extended cryptocurrency slump has led to a Nvidia GPU (graphics processing unit) stockpile, the company’s President Jensen Huang admitted in an earnings report late Thursday, pointing to resulting “excess channel inventory” – a blow to the company slightly offset by a 13 percent rise in gaming solutions revenue.
(Cryptocurrency miners lend their computing power to maintain the decentralised ledger and the first user to complete a complex cryptographic puzzle receives the currency reward; this power is best supported for most by powerful gaming GPUs).
Speaking to analysts on a conference call, he said: “We came into Q3 with excess channel inventory post the crypto hangover. We expected the pricing in the marketplace to decline… but while it was declining, we were expecting sales volume to grow, demand to grow and for volume to be elastic with pricing.”
The comment came as NVIDIA reported a healthy 12 percent quarter-on-quarter rise in net profit, but stocks tumbled 18 percent on the earnings, amid guidance and earnings lower than analysts expected. Nvidia shares have already declined 21.9% in the past three months.
“Gaming revenue was short of our expectations, and our fourth-quarter outlook is impacted by excess channel inventory of midrange Pascal products,” Nvidia CFO Colette Kress said in a statement. “We believe this is a near-term issue that will be corrected in one to two quarters, and remain confident in our competitive position and market opportunities.”
The company’s data centre performance was robust, with revenue of $792 million, up 58 percent year-on-year.
Speaking on an earnings call with analysts, the company’s CFO Colette Kress said: “Demand remains strong for both the architecture products, including Tesla V100 and VGX systems, and our inference business continued to grow, benefiting from the launch of the Turing T4 Cloud GPU during the quarter.”
Pressed by analysts on how long a data centre spending surge powered by cloud adoption could continue, CEO Jensen Huang responded: “We expect to continue to do well in data centers. If you look at the background of what’s happening, we know that Moore’s Law has ended.”
“While demand for computing continues to grow and more and more of the data center is running machine learning algorithms, which is computational and really intensive, the only way to increase computational demand or computational resource is to buy more computers, buy more CPUs because each one of those CPUs aren’t getting much faster. And so as a result of that, the data center CapEx would have to go up.”