
After losing half its value, Nvidia faces reckoning - mmq
https://techcrunch.com/2018/12/12/nvidia-perfect-storm/
======
Townley
As a non-crypto-mining consumer, I've been frustrated by the price increase
for video cards, and perhaps that frustration impacts Nvidia in the long run.

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.

~~~
ianlevesque
They did openly tell investors the cryptocurrency decline was coming too.

~~~
r00fus
They should’ve had a plan in place to transition maybe?

~~~
danhak
What sort of transition, exactly? Their core business is intact and they're
strongly positioned in AI and autonomous driving.

It seems like you're blaming management for the fact that the stock market
mispriced the long-term value of crypto mining.

~~~
Nelson69
Not just is it intact, but is there really an alternative ML/AI platform out
there? They're still the best (only?) game in town with the full stack. And
you can go buy or lease access to their parts right now and get radical
performance improvements for your model training.

~~~
LAMY2000_EF
kseems like a lot of startups are trying to build things equivalent to TPUs.
Also one can use FPGAs for inference(?) maybe also training?

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.

~~~
sitkack
AI is a pretty tractable workload for GPUs/TPUs/FPGAs. Inference is moving to
many more places, the days of Nvidia being the solution for AI are over. It
will still be the goto for research, but as things mature, the nets will
literally run anywhere there is a MAC (multiply accumulate).

~~~
pmoriarty
It may run, but will it run as cost-effectively for the same amount of
performance as it would on a GPU?

~~~
Setepenre
yeah, you have GPU like chips being developed by a lot of companies invested
in AI. From server chips for training, down to cell phone chips for cheap
inference.

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.

------
KaoruAoiShiho
It's up 50% over 2 years and 400% over 3. Idiot article. Ignore the crypto
bubble/pump and NVDA is growing quickly - both the business and the stock.

~~~
Animats
Yes, their stock price is now back to June 2017. Not too bad.

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](https://www.dell.com/en-
us/shop/accessories/apd/490-bens)

~~~
Wowfunhappy
As a gamer, I'm torn on the rtx line. On one hand, it really is _super_
expensive for an entertainment product that will be outdated in a few years.
On the other hand, the exceptionally large die justifies that cost on a
technical level, and raytracing in real time games is legitimately cool—much
more so, IMO, then just another resolution or fps bump.

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.

~~~
benj111
>raytracing in real time games is legitimately cool

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???

~~~
elFarto
Wolfenstein 3D was ray-casting, not ray-tracing. There is quite a difference
between the two techniques.

~~~
benj111
Ok thanks.

According to the wikipedia ray casting article, the two were used
interchangeably "in early computer graphics literature", just to make me feel
even older.

~~~
RantyDave
The big difference is ray casting is just along a line, not on every pixel.
Hence the thing with not being able to make overhangs.

~~~
speedplane
> The big difference is ray casting is just along a line, not on every pixel.

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.

------
wlesieutre
The GTX 1070 launched in June 2016 with an MSRP of $379. Typical prices at the
end of 2018 for that same product are above $400 even after the newer RTX 2000
series has launched.

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...](https://pcpartpicker.com/trends/price/video-
card/#gpu.chipset.geforce-gtx-1070)

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.

~~~
suresk
I think a lasting effect of the crypto craze is that it showed enough gamers
were willing to pay higher prices that nvidia shifted the prices of its card
up by a few hundred bucks.

The RTX 2xxx series has been really disappointing from a price/performance
aspect.

~~~
wlesieutre
I'm looking forward to seeing what AMD has up their sleeves for their next
generation. I don't expect it to compete at the very top end performance, but
I'm betting the performance per dollar will be more in my ballpark.

------
dahart
> It takes a lot for a company to lose nearly half its value in such a short
> period of time, but Nvidia is proving that an otherwise strong technology
> business can disappear in a blink of an eye.

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?

~~~
asdff
Tech crunch is not financial news, its no surprise they fix on stock price as
if it was the end all, be all metric for a business.

------
ineedasername
I'd argue they didn't really lose half their value, they lost half their stock
price. This may seem like a distinction without a difference, but remember
stock price isn't really THE value, it's a valuation, and in this case that
valuation was inflated, incorrect. Their value is still there, it doesn't
appear that they lost any significant market share, and in fact there's plenty
of growth to be had in emerging AI and autonomous driving applications in the
long term.

~~~
yitchelle
I think that most commentators are getting lost in the chaos that is
cryptocurrency. For me, cryptocurrency is an accidental fad that will
dissipate. Nvidia is still growing in AI applications.

------
avar
They got swept up in the crypto bubble, are at $150 now after a high of
$300-ish, but were $20-30 in 2015 before all that. So with the "crypto
depression" this is to be expected.

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?

~~~
shortoncash
I think the market gave too much weight to crypto with regard to Nvidia. The
growth story for the company is still there.

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.

------
ydufucucuc
Is this actually a problem for Nvidia? I'm sure they knew that the
buttobitcoin craze wouldn't last forever and would eventually result in a
stock price fall. They made vast improvements in their technology and raked in
money. That that ride wasn't sustainable isn't a big deal if they didn't make
investments that depended on the bubble never popping.

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.

~~~
usrusr
It can be a problem if ownership changed a lot during the craze and new owners
can't stand the idea of being the ones left holding the bag. Suddenly there
will be pressure to do insane bets and suicidal short term magic that would
not be there if the hype had never happened. Call it residual irrationality of
you like.

------
syntaxing
They still make about 9 Billion a year...I think CUDA/CUDANN is probably one
of their highest "money making" product. Seriously locks down so many
applications that needs to use their card exclusively. OpenGL development
seems slow too so I guess Nvidia has a little bit of time before they have to
worry too much.

~~~
adventured
$12.4 billion in sales the last four quarters, $4.5 billion in operating
income.

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.

------
stdplaceholder
For employees this is a real roller coaster ride. If you had a industry-
standard $500k RSU component over four years, four years ago, you were
recently walking around with 7 million dollars, depending on your sell or hold
preferences. Whereas now you merely have 4 million. On the other hand if you
started a month ago with the same deal, now you have much less than the
industry standard deal.

------
mudil
Interesting fact is that CEO of Nvidia Jensen Huang is a cousin of AMD CEO,
Lisa Su.

[https://en.wikipedia.org/wiki/Jensen_Huang#Personal_life](https://en.wikipedia.org/wiki/Jensen_Huang#Personal_life)

------
empath75
I bought a lot of nvidia at $30 for three reasons — machine learning, VR, and
cryptocurrency. I sold most of it around $180-$200, but I’m still holding some
shares.

~~~
aphextron
It's still a great buy in my opinion, especially after this correction. People
were piling on for the crypto craze, but the fundamentals for $NVDA are still
really good. They've got a mountain of cash, very little debt, and an
unmatched product line.

~~~
empath75
I wouldn’t call it a great buy at this price but I’d definitely say to hold
it.

------
leowoo91
Others are designing their own chips right? How about Nvidia up their game and
provide an IaaS or design a decent mobile product? That could be a move.

~~~
KaoruAoiShiho
Their customers are IaaS providers. That would be extremely dangerous for them
and a step too far probably. I have hope they'll get back into mobile
eventually with the advent of Windows-on-ARM.

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.

~~~
RantyDave
Photography? You fancy taking on Apple?

------
waddlesworth
I'd like to see Nvidia embrace open source and developer relations a bit
better. Similar to what Microsoft is doing.

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.

~~~
steve_musk
At NeurIPS Nvidia said they were working on adding an RTX api to CUDA

------
omilu
The explosive rise of Fortnite last year coupled with the popularity of
streamers like Ninja to elementary school kids, had me convinced that a boom
in gaming pc market was coming and that it would more than make up for the
loss due to crypto mining. I know exactly zero people that crypto mine, Yet I
know several kids who lack machines to play fortnite properly but watch
everything related to the game and lust after there own machine.

------
lkdjjdjjjdskjd
So actually having a couple of years of extremely good sales is bad for
companies, if they are registered on the stock market? I have trouble
processing that information.

~~~
ryanlol
>So actually having a couple of years of extremely good sales is bad for
companies

Why would that be bad? What does bad even mean here? Bad for the stock price?

Sales slowing down is obviously undesirable.

~~~
lkdjjdjjjdskjd
But why should a couple of good years get a company into trouble? It is
inevitable that sales can not always stay as high.

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?

~~~
ryanlol
I'm not sure Nvidia is in trouble. Investors who overestimated their future
performance might be.

~~~
j1vms
> I'm not sure Nvidia is in trouble. Investors who overestimated their future
> performance.

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.

------
Spooky23
This more of a statement of the idiocy of assuming that Wall St valuations are
particularly meaningful.

They were overvalued based on a specific event.

------
pmoriarty
Only one comment in this thread mentioned VR in passing.

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?

------
mxschumacher
the 50% drop has to be seen in the context of the overall market: Apple,
Google, Amazon etc are all ~25% off their peak valuation.

~~~
j1vms
True, though MSFT is at their all-time peak.

~~~
nodesocket
MSFT keeps on surprising me, since nearly everybody I've talked with who's on
or tried Azure says it is a complete dumpster fire. The acquisition of GitHub
was super smart though, and I am willing to bet as we look back it be hailed
as a great move.

------
esharte
If I was Techcrunch writer I'd be more concerned about what is going on at
Oath than Nvidia having a few bumper years.

------
akhilb
If Nvidia are to get back in the game they need to price their product right.
Having products that cost as much as the rest of the rig is simply idiotic.
Their mobile chips have always been problematic. Remember the MacBook Pro
failures a few years ago? Those were Nvidia's GPUs.

------
aurizon
As long as they can cut back orders to fit the market without coin mining,
then they will drop back to a higher point on the growth curce after the
crypto surge has been trimmed. So they whould be fine. The fantasy growth from
crypto is vaporware...

------
Dirlewanger
Good time to buy them for someone who missed them a couple years ago?

~~~
collias
If you're planning on holding it long-term, absolutely.

If you're planning on holding it short-term, good luck catching the falling
knife.

------
rsp1984
_When it comes to owning next-generation application workflows, Nvidia is
facing robust competition from startups and established players who want
access to this potentially gigantic market._

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"?

~~~
stonogo
Regardless of your preferred terms of art, Tensorflow (as an example) is an
application, and a deployment that uses Tensorflow to intuit product
recommendations (as an example) is an application workflow.

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.

~~~
rsp1984
Can you point me to any references for this definition of application? I have
never heard TF being called an application. I'd call it a library or a toolkit
but maybe these terms aren't en vogue these days.

(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.

~~~
stonogo
I'm agreeing with you that 'application workflow' can mean almost anything.
I'm strongly disagreeing that nVIDIA isn't in the business of competing for
almost anything -- that's exactly what they're doing. It doesn't really matter
what your use case is, the nVIDIA sales team has a CUDA (or NVLink, or Tegra,
etc) story for you.

~~~
rsp1984
_that 's exactly what they're doing._

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.

------
sytelus
I Google decides to sell TPU as consumer product you can expect yet another
halving.

------
markc
The future of crypto mining is in ASICs. GPUs can't compete.

------
ryanlol
crypto is not cryptocurrency

------
claudiawerner
It's interesting to me how "value" seems to work - nothing has been physically
destroyed, the products still exist and in fact they are still being made; the
already purchased capital (fixed and variable) is still there - so what's been
lost? Is it a purely speculative quantity? If so, shouldn't we ask why we are
attaching so much significance to something which has very little bearing on
what we, as humans, do: production?

~~~
SolarNet
I hear you. But the point of the stock market is not to produce things, it's
to oversee the allocation of resources to other market sectors (which actually
do produce things). To make a computer analogy it's sort of like an operating
system scheduler, it uses economic resources to better allocate economic
resources.

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.

~~~
rosser
> _I agree it 's pretty stupid, but it works._

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.

~~~
Matticus_Rex
Antithetical as compared to what? Markets are imperfect, but consistently
drive innovation and improvement that benefits consumers. What's your better
alternative?

~~~
rosser
I wasn't aware I had to propose a better alternative in order to be allowed to
offer a critique.

~~~
Matticus_Rex
"Man, it really sucks that we only eat if we harvest food." \- early man

~~~
rosser
I'm sure that's quite clever, but it's utterly orthogonal to my point.

~~~
Matticus_Rex
Not really. Whether something "works" or not is a relative thing. If it works
really well compared to all the alternatives, it's not a loose definition of
"works." Yes, markets suffer from imperfect information and various other
ailments. You can find issues with the solutions to all problems, and while
it's occasionally interesting to talk about those problems, the real question
is whether you can find better solutions.

------
onetimemanytime
Should have never been valued that much to begin with. Losers are those that
gambled

~~~
didibus
Or they're winners? If they sold in time.

They might also be winners if they hold it longer.

------
21
When bitcoin loses 50% of it's value, people say that's the proof it was an
obvious scam and people woke up.

When Nvidia does that, it's just markets...

~~~
rconti
The difference is, in the Nvidia example, it IS just the _markets_ , valuing a
company that produces actual physical products, and sells them for billions of
dollars. The market is a vague guesstimate of what the actual company will do
in the future.

When it's bitcoin, the product's value is literally equal to the market price.

~~~
chrisco255
Technically, the value of ANYTHING is its market price RIGHT NOW. Everything
else is speculation.

~~~
rconti
Cool, then check the market price of an Nvidia video card rather than their
stock price.

