Japanese multinational holding conglomerate, SoftBank Corp. (SFTBY), is planning to sell its 4.9% shares in the leading graphics chip maker Nvidia. According to a Bloomberg report, an anonymous source stated that SoftBank acquired around $3 billion in Nvidia shares in May 2017 via its Vision Fund and could sell all or part of its stake early next year. Vision Fund is an investment vehicle of SoftBank with an end goal of $100 billion in value. After purchasing the shares, SoftBank became the fourth largest shareholder of Nvidia.
Nvidia Corporation is an American technology company which designs graphics processing units (GPUs) for the gaming and professional market. The company also designs system on a chip unit (SoCs) for mobile computing and automotive market. Nvidia found a new market in crypto mining as the users sought to improve their machines. After several years of stock market gains, the share price of Nvidia fell down around 23% this year. In November ended quarter, the company has even missed estimates. According to Jim Cramer of TheStreet, this is because of the slowing demand of crypto miners. The fear of slowing demand for chips has hurt the entire semiconductor industry.
In August, the Chief Financial Officer (CFO) of Nvidia Collette Kress said that,
“Although we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”
Nvidia insiders are also shedding their positions in the company. In the last few months the company insiders have sold around 178,000 shares. The Chief Executive Officer (CEO) of the company, Jensen Huang has also sold 41,000 shares in the same period. In fact, it is not the demand of crypto miners which is affecting the company, but it is the declining demand for graphics processor unit (GPU) mining chips. ASIC mining chips and machines are performing very well in the market because of their efficiency. They are specifically designed for cryptocurrency mining. When Nvidia exit the market the demand for cryptocurrency mining equipment was high and its competitors like Canaan, Bitmain, and Samsung saw a growth in the demand. Because of the large scale crypto mining operations, the demand of these specialist equipment increased significantly.
According to Jim Carner,
“Nvidia still makes the best graphics chips, which have become more powerful than traditional microprocessors. It still has a lead over the competition in a lot of uses, although you could argue that AMD’s catching up to them in the data center while Intel rivals them in self-driving vehicles. I think Nvidia made an honest forecasting mistake.”