NVIDIA Analysis: Stock Hits One-Month Low


The halcyon days of the 1990s and early years of this Millennium in which the premises of every large corporation, small business or enthusiasts’ den was adorned with an array of beige-coloured servers, desktop workstations, switches with rapidly flashing lights, and tens of metres of CAT-5 cabling which looked like grey spaghetti, passed.

The age of the ‘virtual machine’ took over in the mid-2000s, removing the need for companies to invest in physical hardware. This concept was further developed, leading to today’s environment in which most homes or corporate offices do not have any computer hardware on site at all apart from laptops and tablets which are totally portable.

Gone are the server rooms, flashing lights and cables, and most notably of all, those vast, beige computers housed in huge cabinets, and the workstations they served.

As a result, computer hardware is now no longer anywhere near as valuable as it was 25 years ago. The ‘enterprise’ divisions of many large computer manufacturers have changed their tack tremendously and in some cases exited the market altogether, focusing on portable laptops and items more geared toward cloud hosting services.

The one hardware manufacturer that stayed right at the top in terms of big cap value has been NVIDIA, a multinational North American company which has specialised in graphics card manufacturing for many decades.

Given that pretty much nobody assembles their own desktop PC from components anymore, and more to the point hardly anyone owns a desktop PC anymore and have gone toward laptops, tablets and smartphones for everyday and commercial use in Western nations and totally toward mobile-only solutions in China, it would be understandable if NVIDIA’s continued high standing within large American publicly listed companies could be a conundrum.

The reason is simple. Cryptocurrency mining. Ever since the invention of Bitcoin over 13 years ago, individuals wishing to ‘mine’ it have needed to use a graphics card in order to do so, as GPU mining (standing for Graphics Processing Unit) uses computer graphics cards to verify transactions on a blockchain network and earn cryptocurrency rewards by having the GPUs do complicated calculations and solve mathematical algorithms.

For this reason, miners, whether private or large scale commercial, have needed arrays of state of the art graphics cards to be able to stay at the top of their remit.

Private individuals engaging in Bitcoin mining have been dying for many years now, as the electricity needed to mine Bitcoin is so vast that there would be either no reward or negative equity once the power bill is paid, leaving massive commercial mining rigs owned by big companies to do the majority of the work. This is the main market for NVIDIA products, and why it is the only hardware firm still in such a high position among New York’s listed giants.

Over the five days, NVIDIA stock has lost 4.04% in value, and is standing at its lowest point in a month as of yesterday’s New York close.

NVIDIA has had a volatile time over the past few years, largely owing to the exodus from China of many large Bitcoin mining facilities following the 2021 crackdown on mining by authorities in many Chinese provinces.

At that time, used mining rigs went onto the second hand market, flooding the hardware industry with used, cheap NVIDIA graphics cards, and denting the market for new ones given that Bitcoin mining is the main reason why they are in demand.

Just a few months later, the Chinese mining rigs which remained active had been moved to other regions of the world where very cheap or in some cases free electricity can be obtained such as Armenia, Kazakhstan or Venezuela, and recommissioned.

This drove up the demand for NVIDIA graphics cards once again and helped the company maintain its place as a North American big cap tech manufacturer.

There is of course some demand from the gaming sector, whereby some enthusiasts still prefer to use a custom-build PC with a high quality graphics card rather than a console, but the console market dominated by firms like Sony and Nintendo has been hugely influential in putting an end to the average gamer having a PC at home.

However, over the last month, NVIDIA’s stock has been decreasing in value somewhat, with a sudden large drop having taken place yesterday during the New York session. Yesterday, NVIDIA stock decreased in value by 8 points, amounting to 2.96%.

Indicative pricing only

This came as a sudden slide after ten days of declining values for NVIDIA, whose stock went from $280 per share on April 18 to $262 yesterday.

It is an interesting time for NVIDIA, especially when its success relies on such a niche, albeit a huge niche.

Given that the company’s January 2023 earnings were 20% lower than the same time last year, there is definitely a cold, hard figure for people to analyse as well as the company’s market position.

This article represents FXOpen Companies’ opinion only, it should not be construed as an offer, solicitation, or recommendation with respect to FXOpen Companies’ products and services or as financial advice.

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