Nvidia shares fell as cryptocurrency-mining revenue collapsed

Nvidia shares closed 4.9% lower on August 17, 2018, after the chipmaker disclosed that revenue directly attributed to cryptocurrency products in its OEM business had collapsed to $18 million during its second fiscal quarter.

The result supplied unusually concrete evidence that the cryptocurrency-mining hardware boom was reversing. Three months earlier, Nvidia had reported $289 million of OEM sales related to GPUs for cryptocurrency mining. The decline between the two reported quarters was $271 million, or approximately 93.8%.

That reversal mattered beyond Nvidia. Graphics processors had become an important part of the infrastructure used to mine ether and other GPU-compatible assets during the 2017 cryptocurrency expansion. Falling hardware demand therefore connected the digital-asset market contraction to a publicly traded semiconductor supplier’s financial results.

Crypto-specific revenue missed Nvidia’s expectation

Nvidia’s second-quarter fiscal 2019 reporting covered the three months ended July 29, 2018. The company recorded total revenue of $3.123 billion, up 40% from the comparable year-earlier quarter but down 3% from the preceding quarter.

Within that performance, OEM and intellectual-property revenue was $116 million, down 54% year over year and 70% sequentially. Nvidia attributed the sequential decline principally to lower demand for GPUs used in cryptocurrency mining. Only $18 million of the category was identified as cryptocurrency-related revenue.

Contemporaneous reporting said Nvidia had expected approximately $100 million from cryptocurrency-specific products during the quarter. The reported result was therefore $82 million, or 82%, below that expectation. Nvidia’s filing said it expected the directly identified revenue to become negligible in subsequent quarters. That was management guidance as of August 16, not a verified future outcome available on August 17.

The contrast with the preceding quarter was sharp. Nvidia’s first-quarter filing recorded $289 million of OEM sales related to cryptocurrency-mining GPUs during the three months ended April 29. That amount represented approximately 9.0% of the company’s $3.207 billion in total first-quarter revenue.

The stock market registered the reversal

Nvidia common stock, traded on Nasdaq under the NVDA symbol, closed at an unadjusted contemporaneous price of $244.82 on August 17, down from $257.44 on August 16. The close-to-close calculation is a 4.90% decline: ($244.82 divided by $257.44) minus one.

Those prices are the amounts quoted before Nvidia’s later stock splits. Modern historical-data services may display split-adjusted values instead, so the two formats should not be mixed. The measurement window is the regular Nasdaq session close on August 16 through the regular-session close on August 17; it is not an after-hours-only move.

The decline cannot be attributed solely to cryptocurrency. Investors were also assessing Nvidia’s third-quarter revenue guidance of $3.25 billion, plus or minus 2%, and its projected margins. The defensible interpretation is narrower: the crypto-mining contraction was a material component of the earnings response, not the only information incorporated into the share price.

The disclosure had an important boundary

The $18 million figure covered cryptocurrency-related revenue identified within Nvidia’s OEM category. It was not a complete measurement of every Nvidia gaming GPU ultimately purchased by a miner.

Graphics cards marketed for gaming could also be redirected to cryptocurrency mining, while Nvidia sold products through distributors and hardware partners rather than observing every final use. The filing therefore established the collapse of the company’s directly identified cryptocurrency-product revenue, but it did not establish that mining contributed only $18 million to all Nvidia sales.

Even with that limitation, August 17 marked a clear institutional signal. A hardware supplier that had captured hundreds of millions of dollars from the mining cycle was telling investors that its visible crypto-specific business had nearly disappeared within one quarter.