Nvidia stock plummets 20% after disappointing Q3 earnings report and Q4 guidance

Nvidia's new RTX series launched with heavy criticism on its price, availability, and performance, causing Nvidia's stock to slowly decline over 2 months. (Source: Nvidia)

On Thursday, Nvidia released its Q3 earnings report, and as a result stocks plummeted nearly 20% thanks mainly to Nvidia's Q4 guidance, which were $700 million below the expectations of third party analysts who predicted Nvidia would achieve $3.4 billion in revenue. Nvidia claims the lack of crypto demand and surplus of Pascal supply are to blame.

Matthew Connatser, Published 11/18/2018

It seems the magic of crypto currency has worn off and with it demand for Nvidia's desktop GPUs, which were a popular choice for crypto mining despite AMD's GPUs being much better performers. The lack of demand is reflected in Nvidia's Q3 earnings report and Q4 guidance which the company released on the 15th. Nvidia only missed its Q3 target revenue by just a few million dollars, which is forgivable, but to make matters worse the company said it would miss third party expectations for revenue by $700 million in Q4 of this year. Demand was waning in Q3 and it will continue to wane in Q4. As of today, Nvidia's stock price is $164 and is completely flat showing no signs of a rebound.

It gets worse for Nvidia, unfortunately. The company overestimated how much demand crypto would generate for GPUs and produced too many Pascal GPUs, necessitating the need to get rid of them before launching the new Turing architecture, which has only seen the release of three high end GPUs. Nvidia's mid range GPUs are still based on Pascal, and Nvidia has even resorted to demoting GTX 1070s, 1070 TIs, and 1080s to 1060s in order to keep supply moving. While Nvidia profited immensely on the crypto bubble, it seems like the company is now paying for it.

Nvidia's stock has actually been decreasing since October, perhaps due to poor reviews of the then brand new RTX series and disappointment from analysts on what the new RTX series would do for Nvidia. From October 1 to November 15, Nvidia stock had decreased 30%, and from October to today that means Nvidia's stock price has dropped nearly 60%, from $296 to just $164. Nvidia's fortunes are likely to improve in 2019, as Nvidia will be releasing products on the 7nm node from TSMC; Nvidia could also launch new mid to low range products and even a new architecture or at least some redesign of the current Turing GPU. While things right now are bad for Nvidia, we can expect the company to recover quickly in 2019.