So much for the cryptocurrency craze lifting the fortunes of chipmaker NVIDIA Corp. (NVDA). Three months after touting the digital currency market as one of the next bastions of growth for the company, the chipmaker’s CEO, Jensen Huang, is downplaying the impact. It's not a coincidence that his less-than-bullish comments, made during a conference call to discuss third-quarter earnings, coincides with a big sequential decline in revenue for that segment of its business.
For the third quarter, which by most accounts was a blowout three-month period for the Santa Clara, Calif., company, revenue for cryptocurrency products declined by more than 50% to $70 million. In its second quarter, it accounted for $150 million in revenue. During the conference call late Thursday, Huang had this to say about a market he was crooning about in the second quarter: “Crypto is small for us but not zero, and I believe that crypto will be around for some time." (See also: Why NVIDIA's Stock Faces A Growth Crisis.)
When NVIDIA reported second-quarter results, the executive predicted the market would be huge and that graphics processing units (GPUs) to mine for the digital coins will continue to be in demand. He also noted that startups are launching ICOs instead of turning to venture capitalists to raise money. “This is a market that is not likely to go away anytime soon, and the only thing that we can probably expect is that there will be more currencies to come. It will come in a whole lot of different nations. It will emerge from time to time, and the GPU is really quite great for it,” said Huang at the time.
Bearish on Bitcoin
Since those more bullish comments, a lot has happened to the digital currency market and ICOs. For starters regulators from around the world have been stepping up oversight of this new market with China taking the step to ban bitcoin exchanges and ICOs altogether. Other countries have warned about the risk in investing in ICOs and digital currency, which is largely unregulated. That hasn’t stopped the price of a bitcoin, the leading cryptocurrency from surging, surpassing $7,000 earlier this month. (See also: Bitcoin Price Jumps $500 In A Day, Crosses $7,000 Mark.)
The digital currency is getting more legitimacy from CME, the world’s largest futures exchange, which said it will launch cryptocurrency futures by the end of the year. Meanwhile, JPMorgan Chase CEO Jamie Dimon recently called bitcoin a “fraud”—only to see the value skyrocket in the days and weeks after that.
NVIDIA and rival Advanced Micro Devices Inc. (AMD) have been riding the cryptocurrency craze all summer, with GPUs for bitcoin mining selling out. That has prompted price target hikes and new record highs in NVIDIA’s share price. The leading graphics chip company isn’t the only one to temper the outlook on the cryptocurrency market in recent weeks. When AMD reported third-quarter earnings, CEO Lisa Su spooked investors by warning there would be “some leveling off of some of the cryptocurrency demand.”