What's going on?
According to microchip maker Nvidia, worth $150 billion, the cryptocurrency boom is over. The company’s shares fell by 5% on Friday as it predicted lower sales ahead than investors were expecting.
What does this mean?
Nvidia’s quarterly results as a whole were actually better than expected – but the company’s forecasting lower sales of its cryptocurrency chips going forward. It sold just $18 million worth of the chips (down from almost $300 million in the previous quarter), which are used in cryptocurrency “mining” – where computers run complex mathematical equations that create new coins (such as bitcoin). Mining is an expensive process, so the falling value of cryptocurrencies this year may have made some miners think twice and dented crypto chip sales (since the value of the coins being mined has to be worth the cost to mine them – miners either buy things with their coins, sell them for a profit, or hodl).
Why should I care?
For markets: The entire chipmaking industry could be heading towards a slowdown.
On Thursday, Applied Materials – the world’s largest supplier of the equipment used to make microchips – said that its sales and profit for the next quarter would be below investors’ expectations, and its stock also fell on Friday, by 7%. When companies like Samsung Electronics and Intel are ramping up chip production, they call Applied Materials – as they’ve been doing in the recent two-year boom (tweet this). So, Applied Materials flagging a slowdown in demand as its customers pare back spending plans could indicate the chips are headed down overall.
The bigger picture: Better smartphones may mean fewer smartphones.
One reason for the potential impending slowdown in chip sales could be smartphones – there are a fair few microchips in each one of those babies! In the last quarter of 2017, the number of smartphones sold dropped for the first time ever. Now, sales are growing again but only by 1% compared to the same time last year. Perhaps as smartphones get smarter (and more expensive in some instances), consumers may feel less pressure to constantly upgrade to the latest model.