Nvidia shares down 4% on guidance cut Nvidia shares down 4% on guidance cut Nvidia shares down 4% on guidance cut

Nvidia shares down 4% on guidance cut

Peter Garnry

Chief Investment Strategist

Summary:  Nvidia has see a dramatic reduction in demand for its GPUs related to its gaming segment. While there might be some weakening of demand in gaming the real driver is most likely Bitcoin mining which has seen a plunge in profitability forcing many Bitcoin miners to end operations and flood the market with used GPUs causing prices to tumble. The lower GPU prices are forcing Nvidia to write down its inventory by $1.3bn. Shares opened 8% lower but have recovered half the losses as the company says the long-term gross margin profile is intact.

What happened to the gross margin?

A little more than two months ago Nvidia announced FY23 Q1 results showing record revenue, but today the graphics card maker is pre-announcing Q2 results cutting its gross margin (GAAP) guidance for the Q2 quarter (ending 31 July) from 65.1% to 43.7% and expected revenue of $6.7bn compared to previously announced $8.1bn. The shortfall in revenue is driven by its gaming segment which Nvidia is saying is impacted by the macroeconomic backdrop. The fall in demand in its gaming segment has also meant that Nvidia has too much inventory and has been forced to adjust prices. The company is therefore booking a $1.3bn inventory write-down.

It is a well-known fact that Nvidia’s GPUs are heavily used in Bitcoin mining despite the graphics card maker has never officially linked its business to the industry. Because Nvidia does not know precisely the end use case of their GPUs, revenue related to Bitcoin mining likely ends up in both its datacenter and gaming segments. The falling demand for Nvidia’s GPUs has nothing to do with the gaming industry but instead the profitability of the Bitcoin mining industry. As the chart below shows, the profitability of Bitcoin mining has shrunk from being massively profitable in late 2021 to almost loss-making today. This naturally drives lower demand for additional GPUs used in Bitcoin mining and it also forces miners out of business which subsequently floods the market with old GPUs. This increase in available GPUs through secondary sales has caused GPU prices to fall dramatically as revealed by Gizmodo back in June.

Nvidia says long-term outlook is unchanged

The last time Nvidia saw a dramatic decline in its share price was back in late 2018 as Bitcoin mining profitability went negative following Bitcoin’s massive speculative rally in late 2017 drumming up demand for GPUs for mining. This time is no different. Long-term Nvidia is riding many of the most important technology vectors, but a key risk of course is the growing tensions between the US and China which could alter its supply chains and market opportunity. Nvidia has 102 partners in China which is roughly 12% of its total number of partners.

Despite the significant guidance being cut investors are bidding up shares after being down 8% on the open. Nvidia shares have corrected half of the initial decline down only 4%. The reason is likely that the company states that it believes that its long-term gross margin profile is intact.

Nvidia weekly share price | Source: Saxo Group
Bitcoin mining profitability | Source: https://en.macromicro.me/charts/29435/bitcoin-production-total-cost

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.