NVIDIA and excess GPU inventory
NVIDIA’s (NVDA) stock was hit hard on November 15, 2018, when the company reported weaker-than-expected fiscal 2019 fourth-quarter guidance. The guidance suggested the company would experience its first YoY decline since 2013. The company expects its revenue to fall 7.2% YoY to $2.7 billion in the fourth quarter of fiscal 2019.
The expected YoY decline was a result of windfall gains from the sale of GPUs (graphics processing units) to crypto miners. The company reported a sudden spike in the channel inventory of mid-range GPUs in the second half of 2018 as the crypto boom ended but demand from gamers did not pick up. At the fiscal 2019 third-quarter earnings call, NVIDIA’s CEO Jensen Huang stated that the excess inventory would take one to two quarters to clear. To help the channel clear inventory, the company even halted shipments of its Pascal-based mid-range GPUs. NVIDIA’s efforts have materialized, and the excess inventory has almost cleared in just one quarter.
NVIDIA expects the end of excess GPU inventory
In an interview with VentureBeat on January 14, Jensen Huang stated that all channel inventory of its Pascal-based GeForce GTX 1080Ti, 1080, 1070Ti, 1070 had sold out and the GTX 1060 inventory would be sold out by the end of January 2019. This fast clearance of excess inventory is a result of demand velocity. Retailers sold excess GPUs at discounted rates to make way for new GPUs. Moreover, the launch of next-generation Turing-based RTX GPUs in September 2018 reduced the price of the previous generation Pascal GPUs further.
Lack of competition from Advanced Micro Devices (AMD) and higher prices of RTX GPUs encouraged gamers looking for a Pascal upgrade to buy the GTX 10-series, available at attractive prices, which helped the channel clear off most of its Pascal GPU inventory by the end of December 2018.
With excess GPU inventory gone, NVIDIA might report slightly better earnings in the fourth quarter of fiscal 2019. Next, we will see how the end of excess GPU inventory could impact consumers.
Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!