Nvidia Registers Worst Lost in S&P 500 After Crypto Market Crash
The graphics processing unit (GPU) producer Nvidia experienced a negative 4Q. The company had suffered from a massive sell-off of its shares. Its stock price fell around 54% in a very short period of time. This makes of it the worst performer in the S&P 500. The situation of this firm is related to the bear market in the crypto space and the hard situation that miners had.
Nvidia’s Bad Performance in Q4
Nvidia is one of the largest companies that produce GPU around the world. Based in Taiwan, Nvidia has experienced a volatile year. Basically, it has followed cryptocurrency cycles. The firm started the year with incredible results and ended 2018 negatively.
Between 2016 and 2017, Bitcoin (BTC) and other virtual currencies experienced a bull market that allowed them to reach all-time highs. The market was euphoric and investors were trying to enter at all times. Cryptocurrency mining activities have also experienced important growth during that time.
Nvidia, for example, had a market value of $14 billion in 2016. However, back in September, that number grew up to $175 billion. This represents an increase of 1150% in less than 24 months. The demand for GPUs started to grow between these years, something that allowed the firm to expand as well.
There are some virtual currencies such as Ethereum (ETH) or ZCash (ZEC) that can be mined using GPU power. Bitcoin, instead, needs ASIC miners, which are very expensive and consume a lot of energy. In general, larger companies were able to have access to these hardware devices.
It is also possible to see that the growth of Nvidia is similar to the growth followed by Bitcoin’s hash rate. According to data provided by Blockchain.com during the first half of the year, the network’s hash rate increased from 15 million TH/s up to 61 million TH/s in August. Since that moment, and due to the drop in Bitcoin’s price, the hash rate dropped by 50%.
Nvidia has experienced a similar situation. Despite the fact that Jensen Huang, the CEO of Nvidia, said that ‘crypto is small’ for them, the cryptocurrency market has proven to have a big influence on the company. Earlier this year, AMD, a competitor for Nvidia, warned about the slowing growth and that there could be a smaller demand for crypto mining hardware.
Furthermore, chip stocks have performed very poorly this year. Indeed, the PHLX Semiconductor Index is around 20% down in just three months. During the same period of time, AMD’s share price is also down around 45%.
If the crypto market starts to grow in the future, Nvidia could recover part of the value that they lost during the last bear market.