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By most standards,
Nvidia
showed it had a good year when he reported the results late Wednesday. But because semiconductor companies are benefiting from an increase in demand for too few chips, investors are claiming excellence without flaw.
Sure enough, Nvidia (ticker: NVDA)’s shares fell 8% on Thursday as Wall Street wrestled with how the company’s results matched a stock trade at a high 41-fold income estimate for the next 12 months.
Mark Lipacis, semiconductor analyst at Jefferies, attributed the stock’s weakness to the company’s quarter-on-quarter growth in its data center business, along with Nvidia investors’ bad memories of volatile Bitcoin trading.
In recent years, graphics cards powered by Nvidia chips – and traditionally designed for video games – have become popular in machines used to exploit bitcoin and other cryptocurrencies.
In its data center segment, Nvidia showed impressive growth compared to the previous year, almost doubling fiscal sales to $ 1.9 billion in the fourth quarter. Colette Kress, CFO of Nvidia, said sales growth was driven by Nvidia’s new graphics processing unit, or GPU architecture, along with the acquisition of the company Mellanox.
However, data center sales were low compared to the third quarter.
“The flat quarter-on-quarter growth was disappointing for a high P / E share, and it did not have higher expectations on the buying side,” Lipacis wrote. “We see that the expenditure on data centers has recently shown processing periods with growth above the trend line followed by periods of digestion, and that the data center is now in a digestion period.”
Lipacis wrote that such moments in the past were buying opportunities. “More importantly, the last time NVDA sold for the data center during a digestion period was 4Q18-1Q19, which was an appropriate time to buy the stock,” Lipacis wrote.
As for cryptocurrencies, investors seem worried that Nvidia’s recent results have been boosted by the latest rally in Bitcoin, which recently broke through the $ 50,000 level. But previous crypto meetings have proved problematic for Nvidia. When prices in digital currencies fell sharply in 2018, miners were selling their graphics cards fast. The flood of cheap cards has damaged Nvidia’s revenue and left a significant inventory.
Lipacis notes that sales in Nvidia’s video game segment fell to $ 954 million from $ 1.76 billion in the previous quarter by the fourth quarter of that year. Shares fell to about $ 124 from $ 292 within three months, he writes.
Nvidia has taken steps to address the issue – driven by the popularity and performance of its new Ampere-based graphics chips.
Last week, Nvidia announced a specialized range of products for cryptocurrency miners, and sales of such units will reach $ 50 million in the first fiscal quarter, which ends in April. The company also limits the mining capability of its low-end RTX 3060 graphics chips and cards, forcing crypto-miners to pay more expensive cards.
CFO Colette Kress said in the earnings call that the company could not determine what buyers were doing with the current catalog of graphics chips.
Write to Max A. Cherney at [email protected]