Why Is Nvidia Stock Going Down?

Nvidia Stock Going Down
Nvidia Stock Going Down Image credit: CNBC

Nvidia stock is going down, and there are many potential reasons for this. The other day, Musk tweeted that this is because of Autopilot’s inability to distinguish between a tractor-trailer and a car. 

The article discusses how NVIDIA has fallen short in technology and suggests why people are taking their stock down.

Why is Nvidia stock going down?

According to Yahoo Finance, Nvidia Corporation (NVDA) is down 3.01% on Thursday morning. The company’s stock prices have been dropping since the release of its fiscal first-quarter earnings report on Wednesday evening. 

Nvidia reported revenue and earnings beats, but its net income was down due to an impairment charge of $2.9 billion related to its purchase of graphics chip maker ATi in 2006.

On the conference call with analysts following the report, Nvidia CEO Jensen Huang said that he expects cryptocurrency mining to become more competitive and challenging over time as new players enter the market. 

Cryptocurrency mining is a high-cost operation that uses graphics processing units (GPUs) to solve complex mathematical problems to generate new Bitcoins or other cryptocurrencies. Huang said that demand for GPUs for cryptocurrency mining would likely decline in the long term as more efficient hardware comes onto the market.

Huang also said that Nvidia expects gaming laptop sales to decline in the second half of fiscal 2019 because customers are upgrading their laptops to models with GeForce 10-series discrete GPUs instead of purchasing new gaming laptops. Gaming laptops are typically more expensive than regular laptops and typically have higher-end graphics processors than regular laptops.

A Detailed Look at Nvidia’s Business Model

Nvidia Corporation is a technology company that designs and manufactures graphics processing units (GPUs) for the gaming, professional visualization, data center, and automotive markets. 

The company’s products are used in various devices, including personal computers, game consoles, smartphones, embedded systems, and automobiles. 

Nvidia generates revenue from its products by selling licensing agreements to its GPU patents and hardware through direct sales to consumers. In the fiscal year 2016, Nvidia generated a net income of $2.1 billion on revenues of $5.0 billion.

Nvidia has faced challenges in recent years due to weak demand for GPUs in the gaming market and rising competition from AMD. 

In the fiscal year 2017, Nvidia reported revenue down 11% compared to the prior year due to decreased demand in the gaming market. Additionally, AMD launched its latest generation of GPUs in the fiscal year 2017, which challenged Nvidia’s market share. 

In March 2018, Nvidia announced that it would cut 6% of its workforce due to weak demand for GPUs and lower-than-expected revenue growth rates. It was followed by another round of job cuts in May 2018 as demand for GPUs declined.

Several factors could contribute to the declining demand for GPUs, including increased competition from AMD and falling prices of computing resources such as memory chips and storage devices, making using GPUs less cost-effective. 

Additionally, current games are not heavily reliant on graphics features which could lead to an overall decrease in demand over time as games become more graphics-

How do Analysts see Nvidia’s Future?

Analysts have been slashing their ratings of Nvidia shares in recent weeks, with some going as far as to say that the company is in danger of “going under.” The main reason for this pessimism seems to be Nvidia’s declining sales of graphics processors for gaming PCs.

Nvidia has faced stiff competition from AMD ( AMD ) and Intel ( INTC ) over the past year, and its revenue has declined accordingly. But even if the gaming PC market remains flat or declines slightly in the coming years, analysts still see a bright future for Nvidia because it dominates the burgeoning field of artificial intelligence.

Artificial intelligence is exploding right now, with major players like Google ( GOOGL ), Facebook ( FB ), and Microsoft ( MSFT ) all investing heavily in the technology. And according to analyst firm Gartner, artificial intelligence will become a $5 trillion industry by 2025.

It means that Nvidia’s graphics processing units (GPUs) will continue to be in high demand, even if gaming PC sales decline. And because AI is such a critical part of this emerging market, there’s no telling what new applications and products will be created using Nvidia’s GPUs in the years ahead.

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