Nvidia isn’t having a good Q4. In early October, the stock was flirting with $ 290. Now, it’s slid down below $ 150. The company has been hammered for missing its forecasts on cryptocurrency-fueled GPU demand. As a result, Nvidia was stuck with so much unsold product, it announced it would ship no midrange GPUs in Q4 2018 in order to clear inventory. This resulted in the stock taking an absolute hammering, sliding from ~$ 200 to the current ~$ 150.
Now SoftBank is rumored to be contemplating selling some or all of its stake in the company (SoftBank would presently make about $ 3B in profit on the trade). The company is currently Nvidia’s fourth-largest investor. It’s not clear what the prospects are for a near-term improvement in Nvidia’s financial position — the company is considered to be exposed to any worsening of the trade war between the US and China. The Street punished Nvidia harshly for misreading the crypto market so badly, with Goldman Sachs declaring that its own placement of Nvidia on its conviction list was “clearly wrong on the stock.”
We already knew that Nvidia was going to spend Q4 and possibly part of Q1 clearing midrange inventory on the GTX 1060 and equivalent cards; Jen-Hsun has stated that Nvidia made too large a bet on crypto and needs to clear inventory space as a result. What’s not clear is whether or not Turing GPUs are selling very well or not. The top-selling lists at Newegg and Amazon as of this writing show a few RTX 2070 SKUs but are largely dominated by lower-end cards in the GTX 1060 and 1070 families. It’s not possible to draw conclusions based on spot checks like this one, especially since we’d expect Nvidia to sell fewer RTX 2080 and 2080 Ti GPUs, given their higher prices.
At the same time, the reception for the RTX family has been much less positive than for Pascal at an equivalent stage in its own life cycle. Critical opinion does tend to impact product sales, but the huge impact of the crypto hangover is going to obscure any shifts associated with Turing. And at a fundamental level, regardless of what one thinks of Turing, Nvidia is a healthy company. It continues to break AI benchmark records and its hardware underlies a great many systems in AI, ML, and HPC. The stock may be fluctuating and may continue to fluctuate, but at a fundamental hardware level, Nvidia is in great shape.
From time to time we acknowledge shifts in the stock market, especially when they impact a company significantly (and a 50 percent stock drop in a matter of weeks is significant). But there’s a gap — a huge gap — between saying I believe the RTX family of GPUs are too uncertain a bet to justify their current price premiums as opposed to saying “Nvidia’s business model is fundamentally compromised.”
From a technical perspective, there’s no reason to currently doubt Nvidia’s roadmap or timetable for improving products or launching new hardware. I take no position on what Nvidia’s stock price ought to be — I’m not qualified to have an opinion — but the company’s technical outlook has not changed in any way that would justify such huge price shifts. Yes, the company made a mistake on crypto and, I would argue, a mistake with RTX pricing. But nothing has gone so catastrophically wrong with Nvidia on the technical side of the equation to make the current stock price make sense.
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