After losing half its value, Nvidia faces reckoning
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But really, when crypto was booming, what was Nvidia supposed to do? They were the guys selling shovels and pickaxes when the gold rush was in full swing. They rode the bubble and reaped the benefits when they could. So the price drop doesn't necessarily reflect a failure of strategy on their part.
What I'll be curious to see going forward is what Nvidia does with the cash from their bumper year. If the end result of this saga is that Nvidia lined their coffers and invested in R&D for the next generation of of video cards, that bodes extremely well for the company.
It seems like you're blaming management for the fact that the stock market mispriced the long-term value of crypto mining.
I think a lot of people see an opportunity to try to take a slice of the big compute market for ML/AI. who knows if these alternatives really are viable....
but google has a lot of smart people and building your own silicon seems like a great idea these days..so I think other people will attack their stack.
I am really hoping to see AMD entering the battlefield. AMD GPUs are more than capable of handling the workload it is just a software problem.
Nvidia based their own revenue guidance on the same assumptions about crypto mining that market analysts made. They missed their guidance in November because of that.
The only cheaper deal is used (probably mining) hardware on ebay, still closing for %60-%75 of new launch price.[2] If there is really a glut, it sure isn’t reflected in consumer prices. Maybe the new big GPUs can use whatever production capacity isn’t needed yet for mid range products, and make up for lower volume with higher margins. It seems like AMD can’t really compete on efficiency right now – just price and raw performance up to whatever power limit consumers will tolerate (e.g. RTX2070 mostly outperforms Vega 64 with almost half TDP) so they can’t really compete on the high end. As far as I can work out Nvidia earnings aren't falling on low volume (yet); Q3 2018 earnings were up %2.[3]
[1] https://en.wikipedia.org/wiki/List_of_Nvidia_graphics_proces...
[2] https://www.ebay.com/sch/i.html?_from=R40&_nkw=gtx+1060&_sac...
[3] https://nvidianews.nvidia.com/news/nvidia-announces-financia...
If that was the case they wouldn't have 90 days ( 3 months ) of inventory sitting in channels with high volume orders signed with TSMC until December. One of the reason I believe TSMC lowed their 2019 forecast was because AMD and Nvidia have too much inventory.
As you say, there are other forums which have fewer rules about self-expression -- and those forums provide a continually renewed justification for HN's content guidelines.
They didn't overbuild fabs during the gold rush, because they expected it not to last. This is one of the reasons for the GPU price hikes, and supply shortages over the past few years.
As it turned out, this was the correct call.
It's only "failure" for the investors who prodded the inflated valuation along for the past 12-18 months.
That's what happens with those stocks. Companies like NVidia expect it to happen from time to time so the price itself doesn't mean much (if anything they will buy their own stock when at a low price and sell it at a high price). It doesn't change the value of the company (which may or may not be priced correctly by the market at any given time).
The same thing AMD did?
> "So our forward looking estimates when we set out our financial analyst model, it didn’t have crypto in it. It had growth through high performance CPUs, high performance GPUs, some of our base business. If we overlay some crypto on top of that, that’s great. And if crypto goes down in 2018, that’s totally okay, we have plenty of other growth drivers in the business." http://cryptoblockchainresearch.com/2018/01/01/amd-crypto-ex...
NVidia may have focused on the high end too much. They have a card for the machine learning crowd that costs $16,000.[1] The product they're now pushing to gamers, the 2080, is about $1000. It has some ray tracing hardware used by nothing. On existing games it's about the same speed as their 2-year old 1080, which NVidia just discontinued.
[1] https://www.dell.com/en-us/shop/accessories/apd/490-bens
I certainly don't intend to upgrade, but I admire nVidia for the gutsy move, and I'm glad they're pushing the industry in this direction.
Hard to fault this. It's reminiscent of when hardware transform & lighting (T&L) was introduced. Nothing used it until the cards existed, but the cards had to come along before anyone would bother coding it into the games.
For those who weren't around during the first wave of hardware 3D acceleration (circa 90s), there was a huge amount of "X brand only accelerates this and that game."
Nowadays, with DirectX and OpenGL (somewhat) winning the API war, a GPU is a GPU for all games.
It seems entirely reasonable raytracing hardware and game support follow the same path. Supported in some hardware, supported in some games. If the market likes it, over time we see fewer and fewer games that don't use it.
* Caveat: Things are a little different this time since DirectX 12 supports Ray tracing today, as far as I can tell. And Microsoft doesn't really care who wins between Nvida and AMD (aside from keeping suppliers in competitive bidding for XBox GPUs).
I wonder if Intel are about to have deep pockets?
You can use accelerated lighting even in a 2D game, but I'm unclear on what casual games would be using ray-tracing for. Have a particular vision of the future you'd like to share?
Indies and less realistic or more "casual" games may not bother with it, just as many of them don't bother with things like parallax mapping and some don't even bother to use textures at all. The features are there and easy to use but developers opt in and out of the different rendering options based on their artistic styling.
There was no pressing need to replace your 2D card, and in fact you might actively dread it (drivers were finicky back then—replacing your 2D card was signing up for a process not dissimilar to that of building a Hackintosh today.) And computers back then had a lot of room and a lot of spare PCI slots. So why not buy a separate card just for 3D, leaving your existing 2D card intact? Smaller change to worry about.
Hmm, certainly in the 80s and maybe very early 90s but by the time Voodoo cards came along things were much better. Still not up to the "plug and play" level of today, however.
I'm predicting this will be the same kind of story playing out again - One vendor kicks it off, some 'demo' games that build heavily on it drop but are quite short-lived, and the tech slowly turns into a commodity feature with in-game settings menu 'on/off' selectors, followed eventually by ubiquitous support to the point that nobody really talks about it any more, it's just part of 'modern graphics'.
Shaders is another good example that followed that kind of pattern, it was all the shit in the late 90s that Q3 had 'shaders', now it's not even a bullet point for most releases, but it's certainly there.
I've rambled, but my point is that I'm not sure a lynchpin 'RTX required' game is needed at all to drive industry-wide adoption here.
On one hand, there is the appreciation for the technical achievement of something that seemed unlikely for a while (real-time ray tracing), plus as you mention, then increased die size. They look to be pretty good for ML applications, as well.
On the other hand, there is the increased price and, frankly, underwhelming results. The only game that uses the RTX feature suffers substantial performance penalties for turning on the RTX feature and most people (including me) just try it out for a few minutes and then turn it off. Is the quality better? Yeah, the reflections are shaper and more consistent when changing views (ie, aiming down a sight), but they aren't game-changing and are definitely not worth the performance penalty.
This generation of cards is worth skipping if you aren't building a new computer.
That said, this comes with a pretty big cost, both in $$$ and performance. If this could be accomplished without the substantial performance hit that it seems to come with, then it would be fairly impressive and worth the $$$.
Or, come to think of it, a "Half-Life 3: Portal 3" where you use gravity+portal+various paint (and other liquid) guns, on an alien ship and in space, would make a lot of sense...
I personally do think the raytracing footage we've seen is a significant step up, however.
However, nothing will be the step up that bumpmapping brought to the table. Doom 3's textures look like garbage with that disabled, due to the bump/normalmapped greebles all over them. Everything looks like clay or cardboard.
I may be (read am) an old git, and ray tracing just makes me think Wolfenstein 3D. I assume this is a different raytracing? Is it the origin of the rays rather than coming from the 'eye', coming from the light source? Isn't that inefficient? Or something else???
According to the wikipedia ray casting article, the two were used interchangeably "in early computer graphics literature", just to make me feel even older.
I think you have it backwards. Ray tracing is O(#of pixels*number of light bounces). More common 3D rendering is based on O(# of objects in the scene). It's conceivable that ray tracing can be more efficient for scenes with many objects.
[1] https://en.wikipedia.org/wiki/Bidirectional_scattering_distr...
Actually, nVidia's raytracing stuff is—somewhat-uncharacteristically for the company—all done in open APIs.
Don't buy the first generation of anything unless you've got money to burn. Get the second or third.
No, you'll get something worn out after running flat out for a year in a Monero mining farm.
I seriously doubt that we can take this for granted: the RTX 2080 will almost certainly remain near the state-of-the-art for several years.
Here's the thing about gaming vs content creation vs ml pricing -- they're fundamentally different activities from a financial standpoint.
Gaming (for the VAST majority) is a cost center. How much are you willing to spend on it?
Content creation, and now ml, are profit centers. How much do you make from it?
The latter question is directly related to your business. If you're running financial trading models and the card makes you 5% faster, that 5% may be worth USD$1M. If you're running a 1 acre farm, maybe it's worth $3.
But by hardening and popularizing CUDA and GPGPU, Nvidia upscaled their most wealthy buyer from sfx studio to any company that makes predictions.
It's a heck of a lot easier to deliver 1% improvement to a $100M company, than to deliver a 200% improvement to a $500k company.
seems to me like they're making products available at all sorts of price points. i'm not an mba, but that strikes me as a good idea.
not making quite enough mid-level products is unfortunate, but since that was temporary, it wouldn't have made sense for them to invest in increased production.
(they should've abandoned the MSRP and just reverse auctioned inventory to the retailers, so that they could capture the value of their products, instead of letting folks selling on ebay get it.)
> They have a card for the machine learning crowd that costs $16,000
they have hardware that costs way more than that.
But it's in my interest to want maximum bang for my buck and it's in Nvidia's interest to extract maximum money from it's customers. The only escape would be if AMD comes up with an equivalently powerful card and I haven't seen an indication of this happening.
But yeah, it's hard to see them at any risk unless they really mismanaged their capital investment, which is always a risk for companies like this.
If you want to double the framerate you are getting with a 1080 and be on one physical card, with reasonable power and heat, that is the 2080ti.
If you ignore the ray tracing and machine learning features, this is still what you're asking for, is it not?
Or do you mean, you want to pay the cost of a 1080, and get a card twice as good as a 1080? Because i would also love to trade my leaf for a tesla but pay nothing...
And sure, I want to Moore's Law pricing overall. Even if each generation is twice the power of the last generation, I still want each generation at the same price. But again, only with competition.
or perhaps you're right and it's divide and conquer plain and simple.
SLI/CF never scaled linearly and in modern games (if they support it at all) you're usually looking at 10-30 % performance increase, for twice the cost and introducing microstuttering.
Yhe ML quote is from dell and looks to be 'appropriately' dell priced at ~50% markup vs mass retail..
but yes $8-10k is still alot.
That said, if you need this stuff and your super fast $5k workstation is basically an otherwise 'worthless' I/O pump to the GPU, it's still worth the price tag.
I was initially thinking the same on Ray Tracing. But having seen more videos and more tuning so less performance loss when using RT, I am now fully convinced Ray Tracing is the future, and it is achievable. The next 5 years, 7nm, 5nm and 3nm from TSMC is going to make RT Gaming Everywhere.
It's going to be purchased mainly by the cloud vendors to build more power-efficient (and vertically-scalable) instances.
See also: the high-end of the NVMe market for the last five years (i.e. since its inception.)
So they've had an upwards trend in the past. That's no guarantee for future performance.
> Ignore the crypto bubble/pump and NVDA is growing quickly
Quoting the article: That bust is obvious in Nvidia’s revenues this year: they are essentially flat for three quarters now, hovering between $3.1 and $3.2 billion.
We need to be able to distinguish between the 2 tailwinds. AI and crypto. Crypto turned out to be more of a factor than analysts anticipated, leading to the huge runup and then fall. Consider that done and dusted.
However the AI story is consistent and strong. Now that the stock price has come back down to earth we're still looking at amazing returns, there's nothing to be displeased with here.
The Q/Q performance is not concerning because of the product cycles. Every generational change there was a big drop in sales of the previous generation. Look at the first quarter of Pascal and first quarter of Maxwell's introduction and you'll see the same pattern. A flat quarter is actually an amazing improvement over the straight up declines of the previous generations.
Major growth will return soon as new products get ramped.
Is anything a guarantee of future performance?
They've had an upwards trend year after year very consistently. Except for the past 12 months.
So weight those trends accordingly.
I acknowledge that the recent stagnation might only be short-lived, but it would be premature to call this new trend temporary based on the past performance.
At the very least, we know that the environment has changed significantly, because the Crypto cash cow seems to have stopped producing milk.
Also, their P/E is at an healthy 19.99, reasonable.
The article says that Apple is making their own GPUs, that doesn't matter, because Apple is not a nVidia client for a very very long time, and was never a big client.
The others are even less suitable comparasion as those companies aren't making GPUs and they are not just going to walk in that market.
see also: QQQ, XLK, etc.
> It's up 50% over 2 years and 400% over 3. Idiot article.
It's funny because that applies to all crypto articles too.
Fauxbituary
I should buy that domain
The "cryptocoin" itself functions more like a commodity, a market which was never for the passive retail trader because there is no expectation for commodities to increase in value indefinitely, only in ebbs and flows based on supply and demand. So the prevalance of the retail trader in the cryptocoin market explains the misaligned value ideas, which are mostly analogies to a stock market. Oops. Although stocks are the only capital market prevalent amongst retail, try not to get the asset classes confused.
"Cryptocoins" typically have a more transparent supply than non-digital commodities, and upgrades to their utility are also typically in open source projects which means these provides advantages in determining price targets in the future value and the scale of the addressable market participants. As in, how much any future market participant will want to own to access a provision provided by the network. As open source projects, and freely fungible, you can create utility for a new market until your positions are profitable, with near zero overhead costs.
Instead of the government of the United States or China or Britain or India or some other actual entity that is highly likely to survive nearly any catastrophe or change in leadership, cryptocurrencies are backed by shady MLM hucksters who originally met on a minor and very geeky gaming BBS to come up with their scheme, and whose downline marketers hire C- and D-list celebrities to shill for them. You don't even end up with a garage full of awfully-scented soap when it crashes.
But your disdain is still too broad and blanket.
There are plenty of ways to be productively deploy resources for profit in that market. Its typically just not a directional/long-only passive approach, it is more actively creating an asset and market until you are satisfied. Just like in other markets.
I and pretty much every other PC gamer I know have been holding off buying upgrades until prices come back to some level of sanity. I don't understand how Nvidia (and EVGA, XFX, MSI, Zotac, Gigabyte, etc) can keep trying to sell at these absurd prices then turn around and complain about how not enough people are buying them or they don't make enough money.
Have their costs unexpectedly shot up on their two-year-old manufacturing processes? Or did they just bank on the crypto bubble to prop up inflating GPU prices forever and were surprised when it didn't happen?
Going forward they've doubled down on even higher prices for next generation, with versions of the RTX 2070 currently at $500 to $600.
https://pcpartpicker.com/trends/price/video-card/#gpu.chipse...
EDIT - I should add, my first thought on this was that gamers are no longer a market that Nvidia cares about, and they're hoping that high prices will still sell to the machine learning (where people are frequently spending someone else's money on a large quantity of cards) and cryptocurrency markets. Then crypto dropped out, and ML are considering other options even if Nvidia are the top performers.
But the RTX series is pitched for realtime raytracing effects in upcoming games, which sends the message that they do take gaming seriously. But I think they're out of touch with how much people are willing to spend on it.
The RTX 2xxx series has been really disappointing from a price/performance aspect.
The price doesn't reflect what it costs them, it reflects what they believe they'll make the largest profit margin on.
> Or did they just bank on the crypto bubble...
It's investors that were banking on that. Share price doesn't say anything about the success of a company (except for ability to raise money), it's just a consensus of estimates about future value.
NVidia are still very successful in their original niche of making graphics cards, and haven't sacrificed this in favour of crypto.
https://seekingalpha.com/article/4182662-nvidia-appears-gpu-...
To me, that says "priced too high," they might be making great margins but they couldn't sell all of them. I probably would've bought one if the price were more in line with the GTX 900 series. At this point I'm hanging on to see how AMD looks, either for getting one of their new cards or hoping they can put some pricing pressure on Nvidia.
Then again, AMD's making pretty bold claims about their pricing for next year, so you could hang on.
Definitely planning to see what AMD has coming. I'd like to have the Mac + eGPU option open when my Wintendo kicks the bucket, and AMD are the only ones supporting that right now.
Very constant workload, way below peak capacity - I bet that crypto usage does put much less wear and tear on the chips than heavy gaming use.
https://pcpartpicker.com/products/video-card/#c=373&sort=pri...
Conflating the stock price with the company's business/book value multiple times seems like probably not an accident for a financial reporter. Is there some agenda here to frame/spin the story this way?
But the question I find more interesting is what this does to a company. Is it even plausible for them to go back to just running the company as though it were worth $20-30 and pretend it never happened?
Or are they going to have investors who bought in at 2-3x that price at best screaming for them to inflate their stock by whatever means necessary?
The article is talking about other companies designing for their own custom needs, but I think the mindshare has largely already been captured by Nvidia. Why? Because their software stack, even with its quirks, is still better than a lot of what else is out there. In the current marketplace, deploying custom GPU solutions without Nvidia products is really painful and something only someone who enjoys pain would undertake.
Your math is way off, they don't need to pretend nothing happened and go back to $30 / share. The crypto bubble (now imploded) isn't why they're still generating $4 billion in annual profit ($1 billion in operating income last quarter). It's not a critical part of their business; in actual numbers it was a modest party on the side for several quarters and some investors had hoped it would be more than that. The removal of the crypto boom from expectations, is causing a let-down in the projected upside in the stock and their business. Crypto wasn't 3/4 of their business, or the last quarter results would have shown that type of destruction.
Your $20-$30 share price would peg them at a $12 to $18 billion market cap. They could justify that with just the earnings from their latest quarter.
If I was an investor I'd be pissed, but only because investors want prices to rise regardless of any underlying physical reality, but the executives should be laughing all the way to the bank. It's just a post bubble correction.
Their business situation is fine, entirely without the crypto market. Intel saw little growth for many years, while generating immense profit, and while the multiple that investors were willing to give them compressed. Intel will soon have a 10-12 PE ratio. The entire semiconductor industry saw a dumping in the stock market, blamed on an industry down cycle. Micron is trading for three times earnings as another example. nVidia was up at ~43 times earnings before the drop, very rich for the industry. Now they're down closer to ~22, which is a lot closer to fair value based on their reduced growth expectations.
The issue that the article entirely ignores, is valuation compression with a stock market that decided to dump some rich multiple stocks (Netflix is down ~35%) and particularly semiconductor stocks. That's how you lose half your valuation in a few months.
Their focus right now is rightly on the AI software stack. That's where the value is going to be generated in the future decade and NVDIA needs to make sure all that value is generated using their platform. There are so many verticals that will be buying products, so much money to be made. They're also heavily investing in autos, but tbh that's just 1 vertical and imo not even the most exciting one.
Verticals like healthcare, restaurants, home robot servants, logistics, photography, constructions, are even more exciting and lucrative.
I definitely think it's in their best interests to open up RTX capabilities as much as possible, and it's not like developers aren't interested.
Why would that be bad? What does bad even mean here? Bad for the stock price?
Sales slowing down is obviously undesirable.
I could understand if NVidia would have done some kind of investment that was only sustainable if the good times would continue the same way for a while.
But it seems to me they will just continue to make good graphics cards, as they did before. So why should they be in trouble?
The problem is that management did not do enough (as far as investors were concerned) to temper market expectations. It may have been they truly did not know who was buying their product, and they believed most of their clients were coming from ML and gaming, when instead it was heavy, heavy crypto.
Other than that, as the article mentions, it was trade tensions that turned the quarter miss into a perfect storm for a sell-off.
They were overvalued based on a specific event.
Some years back it seemed to be a decent possibility that GPU manufacturers could benefit from VR's huge appetite for GPU performance. How does HN feel about that now? Has VR turned out to be just a flash in the pan, and not a serious market for GPU manufacturers after all? Or is there still hope?
If you're planning on holding it short-term, good luck catching the falling knife.
Am I the only one who cringes when someone says or writes "application" but actually means "datacenter" or "internet service"? The author is clearly not talking about Mobile or Desktop Apps here.
And even with that term cleared up, WTF are "next-generation application workflows"?
It doesn't really matter what kind of device the program runs on. It's running in userspace: it's an application. It does not function in a vacuum: it's part of a workflow.
(Software) Application to me means quite literally any (software) work that "applies" technology to solve a concrete end-user problem.
But I guess you're just proving my point: If we use your definition of application the quoted article text is essentially meaningless since "application workflows" could mean almost anything and NVIDIA certainly isn't in the business of competing for almost anything. If we use my definition the author has just misused the term.
No they're not. For instance they completely turned their backs on Mobile (Tablets, Phones, Wearables, Laptops, etc.) and there's no indication they are coming back any time soon.
I know because at some point my company was one of their largest individual SHIELD tablet customers. That is, until they stopped making them and asked us to find another supplier.
Value here is a proxy for predicted success which then translates to access to resources. Not directly, but markets with lots of predicted success then have access to investor capital. Also companies can own their own shares, and often do use those shares to get access to new capital, and companies can be purchased by larger companies, giving them more capital to work with.
I agree it's pretty stupid, but it works. Check out prediction markets for example. That's not to say that it's efficient by any stretch, but allocation of resources is NP hard, and this algorithm works well with humans.
As capricious as markets are, that's a pretty loose definition of "works". All too often, equity markets are just a force multiplier for herd mentality, and end up being actively antithetical to actual value and resource allocation.
One other property of markets is that they're very good at transferring wealth from those who get caught up in the herd mentality to those who do their own research and hold their own opinions. This may be bad for wealth inequality, but it does make them self-correcting when it comes to human emotions.
In corporate finance, valuation has a specific meaning. In this case, lost half of its value is correct; even better would be "market value".
Book value is the term for assets minus liabilities, so “value” without qualification tends to imply all types of value at once. The term “company value” used at the end of the article might even tend to imply more book value than market value to the average techcrunch reader. I suspect the author intended to conflate them in order to paint a picture that is more negative than the real story.
He definitely conflated market value with book value when he wrote “Nvidia is proving that an otherwise strong technology business can disappear in the blink of an eye.” That line is more or less pure hyperbole.
Production is what most humans spend their working days doing or supporting or contributing to.
In the case of company value, investors care not only about what the company is worth today but also about what it will be worth in the future. It makes sense that lower sales result in a lower stock price despite the fact that the products and current capital are unchanged.
Example, people can value something very highly but not have funds to buy it, someone who can afford the price easily can value something as being of little worth, but due to their wealth they can afford it.
You appear to be confusing price, ability to pay, and value.
Do look at art. You can buy a hugely influential piece of art and not value it at all, you buy it as an investment but don't care about its innate qualities, its influence on the art world (directly, only indirectly by the price that confers) or it's cultural worth.
They might also be winners if they hold it longer.
When Nvidia does that, it's just markets...
When it's bitcoin, the product's value is literally equal to the market price.