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For most measures,
Nvidia
proved he had a good year when he reported results Wednesday at the end. But with semiconductor companies benefiting from low-chip demand, investors are calling for flawless excellence.
Indeed, shares of Nvidia (ticker: NVDA) fell 8% on Thursday as Wall Street struggled as the company’s results coincide with a stock trading with a high earnings estimate 41 times for the next 12 months.
Jefferies semiconductor analyst Mark Lipacis attributed the stock’s weakness to the company’s flat-to-quarter growth in its data center business, along with bad memories from Nvidia investors around volatile trading of Bitcoin.
In recent years, Nvidia chip-powered graphics cards – and traditionally designed for video games – have become popular on machines used to extract bitcoins and other cryptocurrencies.
In its data center segment, Nvidia recorded impressive growth compared to the previous year’s period, nearly doubling fourth-quarter fiscal sales to $ 1.9 billion. Colette Kress, chief financial officer of Nvidia, said sales growth was driven by Nvidia’s new graphics processing unit or GPU architecture, along with the company’s Mellanox acquisition.
Still, data center sales were flat, compared to the third quarter.
“The quarter-on-quarter growth plan was disappointing due to high P / E action, and fell short of higher purchase expectations,” Lipacis wrote. “We note that data center spending on processors has recently shown periods of growth above the trend line followed by digestion periods and that the data center is in a digestion period now.”
Lipacis wrote that these 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 turned out to be the right time to buy the shares,” Lipacis wrote.
As for cryptocurrencies, investors seem worried that Nvidia’s latest results have been driven by the latest rally on Bitcoin, which has recently surpassed the $ 50,000 level. But previous encryption meetings have proven to be problematic for Nvidia. When digital currency prices fell rapidly in 2018, miners quickly sold their graphics cards. The flood of cheap cards damaged Nvidia’s revenue and left a significant inventory.
Lipacis notes that in the fourth quarter of this year, sales in Nvidia’s video game segment had fallen to $ 954 million, up from $ 1.76 billion in the previous quarter. Shares fell about $ 124 from $ 292 in three months, he wrote.
Nvidia has taken steps to fix 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 amount to $ 50 million in the first fiscal quarter, which will end in April. The company also limits the mining capabilities of its low-end RTX 3060 graphics chips and graphics cards, forcing crypto miners to pay for more expensive cards.
Chief Financial Officer Colette Kress said in the earnings 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]