Happy holiday season, campers! What’s up with the Real Money Portfolio as we head into a slow Thanksgiving week?
The most brutal takedown of the week was NVIDIA (NVDA), which I’m sure many of you noticed this morning — that’s a stock that hit a stop loss a while back for us (I was watching both the $208-215 level as well as $199 as stop loss trigger points), though I’ve personally been trading-restricted on the stock so haven’t been able to exercise the stop loss… and I got punished for that a bit more today after earnings.
So what happened? Well, the ugly is that the stock is down another 20% or so… the reason, as I see it, is that NVIDIA pretty dramatically underestimated the impact of cryptocurrency mining on the market for their core GPU chips. They guided down last quarter because they saw that cryptocurrency mining demand was drying up, but they didn’t guide down by enough, probably because they couldn’t really tell how much of retail GPU demand was from gamers and how much was from folks building mining rigs and driving up prices — the overproduction of the mid-range GPU gaming cards by both NVIDIA and AMD stuffed the channel with inventory because prices were high on crypto demand, and then crypto demand disappeared almost overnight and retailers didn’t slash prices and clear the inventory fast enough, so it’s just sitting there. And, of course, the folks who built up their mining capacity just before the crypto collapse are now sitting with lots of equipment they don’t really want anymore, so there are probably a lot of lightly used GPUs being pushed through eBay.
That means they’re essentially halting production of those midrange chipsets, which are mostly used for mid-range gaming desktops, for which price often matters (and cryptocurrency mining, until this summer, for which price briefly didn’t matter), and letting the inventory sell through.
And this hits at the same time as they have their slowdown from chips that go into holiday gadgets like the Nintendo Switch, since that production tails off in the fourth quarter (the stuff being sold at Christmas is already built, and no one wants to overproduce)… so the guidance for the fourth quarter, as they lose those GPU sales (about a third of their gaming chip sales are essentially on hold), is a huge disappointment compared ...