Is the crypto boom over? Nvidia forecasts drop in sales

(FinancialPress) — Famed chipmaker Nvidia released its quarterly earnings last week. Among positive results for Q2 2018, the company also indicated a lower sales guidance than the one investors expected for the next period. The news made company stock drop by 5%.

While its overall results beat estimates, the lowered sales forecast for its cryptocurrency chips paints a picture of uncertainty going forward. Nvidia sold just $18 million in chipsets. Q1 saw them almost reaching the $300 million threshold. The chips are used in cryptocurrency “mining“ – a process in which they solve complex mathematical problems to generate new coins. Mining is an expensive activity, which many believe that the drop in cryptocurrency prices may have deterred miners from expanding their operations – thus hurting chip sales.

This could signal the beginning of a decline in growth for the chipmaker industry. Further fueling speculation, the biggest supplier of chipmaking equipments, Applied Materials, also reported lower-than-expected sales and profit forecasts for the next quarter. Their stock was docked 7% as a result. As an index of the landscape, it‘s worth noting that when the major chip manufacturers such as Intel and Samsung intend to increase their production, they call Applied Materials. A decrease in AM‘s sales is a safe indicator of that the industry is entering a slowdown period.

“As foundry customers optimize existing capacity, they have trimmed their capital spending plans for the year,” Chief Executive Officer Gary Dickerson told analysts after the earnings report was released.

Morningstar analyst Abhinav Davuluri expects “relatively weaker spending“ in memory chips during 2019 – which will, in turn, result in lower manufacturing equipment sales.

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