NVIDIA Corporation (NASDAQ:NVDA) Fails To Maintain Stock Rally After Surpassing Estimates

NVIDIA Corporation (NASDAQ:NVDA) recently released its financial results for Q1 of 2018 revealing a stellar performance that managed to surpass the estimates. Unfortunately, it has failed to keep up the strong rally in the price of the stock dropping following the announcement that it expects lower revenue in the second quarter.

According to Nvidia, the impressive performance was partly due to the impact of the cryptocurrency mining community. The company sold graphics cards worth $289 million to cryptocurrency miners within the first quarter of 2018. However, it recently announced that revenue in the second quarter will most likely be slashed by two-thirds. This has a lot to do with the volatile nature of the market and the increased competition from ASICs which are marketed as more efficient and faster. Nvidia stocks dropped significantly after the Q2 estimates were revealed.

The announcement the first time that Nvidia had quoted sales specifically from the cryptocurrency mining market. Despite the fluctuating sales expected from the crypto mining community, the GPU maker revealed that sales in its main target market which is the gaming community would still remain strong even in the second quarter of 2018.

Nvidia revealed that it expects a revenue figure of $3.1 billion in the second quarter which is higher than the analysts’ consensus estimate of $2.95 billion as revealed by Bloomberg. Part of Nvidia has been getting involved in emerging trends that are changing the direction of the computing industry. These technologies include language processing, machine learning, artificial intelligence, and data center operations among others. There is also a lot of demand for its graphics cards from the gaming community and all these factors are expected to contribute to an impressive revenue figure for Q2.

The GPU maker’s CEO, Jensen Huang pointed out that the few months have been tough on the gaming community due to inaccessibility of graphics cards due to high prices. This was as a result of the heavy demand for graphics cards from cryptocurrency miners thus pushing up the prices.

The gaming industry is still Nvidia’s biggest market at more than 60 percent and thus the need for the company to double down on making sure this particular market is well served. It is also worth noting that the company had previously stated that it does not consider the cryptocurrency market to be one of its main businesses which is a good thing considering that it is a highly volatile market. However, the company cannot simply ignore the fact that it is a high-revenue market and thus the need to be prepared and one of the best ways to do this is to ramp up production.

Heavy growth in the gaming industry is expected as a result of the increasing demand for the ultimate experience, especially in AAA games. The company also revealed noteworthy growth especially in the data center business whose revenue grew to $701 million, thus surging by 71 percent. Despite the lower revenue expectation especially from sales to the cryptocurrency mining community, Nvidia is still banking on heavy growth from other key areas.