Nvidia has hauled in hundreds of millions of dollars selling its chips to cryptocurrency miners, but its exposure to that market is hurting the stock following a slide of more than 3% for Bitcoin and Ethereum in 24 hours.
Nvidia (ticker: NVDA) shares retreated 2.5% to $183.24 on Tuesday, after investors received shares in a four-for-one stock split after the close on Monday. Shares may have briefly appeared to fall harder early in the day, before market data was adjusted to account for the split.
The stock is up 74% over the past year, while the PHLX Semiconductor index, or Sox, has risen 51%.
The company’s most recent exposure to cryptocurrencies dates back to last year, when miners discovered that its Ampere-based graphics chips were good at producing Ethereum. The chips were so popular among miners—videogame players may use one or two, while miners use many, many more—that Nvidia designed a version of the semiconductors that are specifically designed for mining. It throttled the videogame cards’ mining functions.
In its fiscal first quarter, which ended in April, Nvidia sold $155 million of its crypto chips, according to finance chief Colette Kress. Management expects crypto revenue of $400 million for the second quarter.
Kress’s figures don’t include the videogame graphics chips that miners are buying–some of those used by gamers can also be put to work mining. BMO Capital Markets analyst Ambrish Srivastava estimated overall first-quarter cryptocurrency revenue was about $650 million.
Bitcoin’s drop to below $30,000 Monday and the decline in Ethereum, particularly, may have spooked investors who are betting that high cryptocurrency prices will continue to drive Nvidia’s chip sales. Near midday on Tuesday, Ethereum was trading at $1,755.86, but last year, when the price was $300 to $400 range, RBC Capital Markets analyst Mitch Steves estimated one of Nvidia’s RTX 3080 cards would net miners about $3 a day, and take 233 days to achieve profitability.
Last year’s surge of interest in the line of Ampere chips isn’t the first time Nvidia has had big exposure to the volatile cryptocurrency market. Back in 2018, its graphics processors were also popular with miners.
Toward the end of that year, a slump in Bitcoin and other crypto prices prompted miners to try unload their hardware, unleashing a flood of cheap, used Nvidia graphics cards onto the market. Nvidia’s sales slumped, with declines in revenue of as much as 31% for four straight quarters.