How the Cryptocurrency Boom Affected NVIDIA’s Gaming Seasonality



NVIDIA’s gaming business update 

NVIDIA’s (NVDA) gaming revenue rose 66% YoY (year-over-year) but fell 1% sequentially in fiscal Q1 2019. Generally, the fiscal first quarter is a seasonally weak one for the company’s gaming business. During this time, it reports a 15%–20% sequential decline.

However, fiscal Q1 2019 was a little different, as the cryptocurrency boom, which started in fiscal Q4 2018 and continued into Q1 2019, created a GPU (graphics processing unit) supply shortage for gamers. On NVIDIA’s fiscal Q1 2019 earnings call, its CFO, Collette Kress, stated that the company’s GPU channel inventory was very low at the end of fiscal Q4 2018, and because of this, the company had boosted production to replenish its inventory.

At the end of fiscal Q1 2019, NVIDIA managed to bring its channel inventory to healthy levels, thereby easing GPU prices by March’s end.

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Crypto mining and gaming seasonality

On the same earnings call, NVIDIA’s CEO, Jen-Hsun Huang, stated that even though GPU prices have begun to normalize, they’re still above the manufacturer’s suggested retail price, suggesting that the pent-up demand from gamers is still strong.

He stated that the global popularity of Fortnite and PlayerUnknown’s Battlegrounds is driving demand for GPUs all over the world. Moreover, upcoming games will keep overall gaming GPU demand healthy. For this reason, Huang is expecting fiscal Q2 2019 to be a better-than-seasonal quarter for gaming revenue.

On the other hand, Kress expects the crypto boom to fade in fiscal Q2 2019, with crypto card sales expected to fall 66% sequentially. Weak demand from crypto miners is expected to be offset by strong demand from gamers, resulting in flat growth in gaming revenue in fiscal Q2 2019 on a sequential basis. Rival Advanced Micro Devices (AMD) also expects GPU demand from crypto miners to fall, but it expects demand from gamers to remain strong in the second quarter.

Next, we’ll look at NVIDIA’s data center business.

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