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By most measures,
Nvidia
he said he had a good year when he reported results late Wednesday. But with semiconductor companies benefiting from increased demand for too few chips, investors are calling for flawless excellence.
Sure enough, shares of Nvidia (ticker: NVDA) fell 8% on Thursday as Wall Street struggled with how the company’s results matched stock trading at a 41-fold estimate of revenue for the next 12 months.
Jefferies semiconductor analyst Mark Lipacis attributed the weakness of the company’s flat-growth quarterly growth in its data center business, along with bad memories of Nvidia investors in connection with volatile Bitcoin trading.
In recent years, Nvidia chip-powered graphics cards – and traditionally designed for video games – have become popular in machines used to extract bitcoin and other cryptocurrencies.
In its data center segment, Nvidia reported impressive growth compared to a year ago, nearly doubling fourth-quarter fiscal sales to $ 1.9 billion. Colette Kress, Nvidia’s CFO, said sales growth was driven by Nvidia’s new graphics processing unit or GPU architecture, along with the acquisition of Mellanox.
Data center sales, however, were flat compared to the third quarter.
“The smooth quarter-on-quarter growth was disappointing for a high P / E share and lower buying expectations fell,” Lipacis wrote. “We note that processor data center spending has recently seen periods of growth above the trend line, followed by digestion periods, and that the data center is now in a period of digestion.”
Lipacis wrote that such moments in the past proved to be buying opportunities. “More importantly, the last time NVDA was sold during a data center digestion period was 4Q18-1Q19, which proved to be a good time to buy the stock,” Lipacis wrote.
When it comes to cryptocurrencies, investors seem worried that Nvidia’s recent results were boosted by the latest Bitcoin rally, which recently surpassed the $ 50,000 level. But past encryption rallies have proven problematic for Nvidia. When digital currency prices fell rapidly in 2018, miners quickly sold their graphics cards. The flood of cheap books affected Nvidia’s revenue and left it with a significant inventory.
Lipacis notes that by the fourth quarter of that year, sales in Nvidia’s video game segment had dropped to $ 954 million from $ 1.76 billion in the previous quarter. He wrote that shares fell to about $ 124 from $ 292 within three months.
Nvidia has taken steps to resolve the issue – driven by the popularity and performance of its new Ampere-based graphics chips.
Last week, Nvidia announced a specialized product line for cryptocurrency miners, estimating that sales of such units will amount to $ 50 million in the first fiscal quarter, which will end in April. The company is also limiting the mining capabilities of low-end RTX 3060 chips and graphics cards, forcing crypto miners to pay for more expensive cards.
Chief Financial Officer Colette Kress said in the winning call that the company has no way of determining what buyers are doing with its current catalog of graphic chips.
Write to Max A. Cherney at [email protected]