Nvidia Sales Fall 33% Amid Crypto Crash, Decreased Gaming Demand

’Visionaries’ Podcast: Sean ‘Hutch’ Hutchinson

If you’re like me—a mid-20-something who has gamed your entire life—you’re likely familiar with Sean “Hutch” Hutchinson. At the dawn of YouTube’s boom in the late 2000s and early 2010s, Hutch held the title as the most popular gaming creator on the platform. Known for his “Call of Duty” commentary, he became a co-host of Machinima Respawn’s highly-viewed daily videos. But then, in 2012, at the peak of his popularity, he walked away for six months. I sat down with him on Wednesday to discuss his journey, how gaming has evolved and what’s next for our still-nascent industry.You can find it on: Apple Podcasts | Spotify | Other PlatformsNow on to today’s main story… 

On Wednesday, Nvidia reported its Q3 2022 revenue of $5.9 billion, down $1 billion from Wall Street analyst projections for the semiconductor manufacturer. While not unexpected, the most stunning part of Nvidia’s financial report was its sales: down 33 percent year-over-year from 2021 and 44 percent from the previous quarter. In its earnings call, Nvidia executives did not speculate as to why sales plummeted—other than citing a decrease in demand for Nvidia’s high-end graphics cards often used for gaming PCs.

That checks out, but there’s potentially more at play here: crypto and its meteoric fall over the past year.

“Our GPUs are capable of cryptocurrency mining, though we have limited visibility into how much this impacts our overall GPU demand,” Nvidia CFO Colette Kress said in Wednesday’s earnings call.

“Volatility in the cryptocurrency market—such as declines in cryptocurrency prices or changes in method of verifying transactions, including proof of work or proof of stake—has in the past impacted, and can in the future impact, demand for our products and our ability to accurately estimate it,” Kress said.

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In the past 12 months, Bitcoin is down 55 percent, from $48,987 per token to $21,589 per token. Ethereum has experienced a similar drop, down 47 percent in the same period, from $3,228 to $1,695 a token.

With the significant drop in value, the benefit of mining these coins—which cost thousands to rig up for—is bottoming out. That’s presumably a big part of what’s impacting Nvidia’s bottom line, whether measurable or not.

During the 15 months of COVID prior to mass vaccinations in the U.S., Nvidia’s graphics cards were nearly impossible to find.

Crypto miners and scalpers set up purchasing bots to snag both the first-party editions built by Nvidia and many of the third-party ones built on Nvidia’s architecture. At one point, many of the manufacturing companies instituted waitlists and email verifications to weed out this problem, but even those were relatively ineffective.

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Stock for these cards also became scarce, as manufacturing in China and elsewhere took a massive hit due to pandemic-related supply chain issues. Markups on Nvidia’s cards remained enormous for the better part of two years.

According to The Verge and data analyst Michael Driscoll, Nvidia cards were selling anywhere from 1.99 to 3.09 times their value on eBay. Users spun up Discord bots and Telegram groups to push notifications to those hunting for the GPUs (after more than a dozen attempts, yours truly got a RTX 3090 at retail price on Amazon in December 2020 by some odd luck. It still took four weeks to ship to me.)

This demand wasn’t just miners though: It was gamers, to Nvidia’s point in Wednesday’s call.

While we were all isolated for COVID, gaming experienced a massive boom. Forty-six percent of gamers said they played more during the pandemic, according to data from Nielsen. Gaming became a commonplace hobby for many previously disconnected, too, as work-from-home became standard and live events, nights out and bar crawls were eliminated. Both computer parts and consoles like the PlayStation 5, Xbox Series X and Nintendo Switch all experienced supply issues.

Now, though, life is returning (somewhat) to normal. Gaming is seeing a decrease in interest. People are venturing outside and returning to their active social lives. And both computer parts and gaming consoles are seeing a market correction. A much-needed one, if you ask me.

Elsewhere in Gaming and Esports

🎥 “Twitch does away with streamer exclusivity policy it wasn’t enforcing” (Nathan Grayson / The Washington Post)

Twitch made a major policy change this week, removing streaming exclusivity baked into all its partner agreements. (Disclosure: I am a Twitch partner, although fairly inactive.)

Previously the platform allowed partners to create live content for Twitch only, but now it will let them simultaneously broadcast on other platforms—with a small catch. Creators can simultaneously cast to short-form content platforms such as Instagram and TikTok, but not to longer-form ones like YouTube and Facebook. This comes on the heels of a Bloomberg report that Twitch is considering slashing its deals with top creators from 70-30 to 50-50.

🟢 “Xbox’s Spencer Sees Progress Toward Activision Deal Approval” (Emily Chang & Dina Bass / Bloomberg)

A story we’ve been following closely here at The Jacob Wolf Report: Microsoft’s pending acquisition of Activision Blizzard. In an interview with Emily Chang, Xbox head Phil Spencer spoke confidently on the odds of the completion of the deal. That acquisition also cleared its first regulatory hurdle, as Saudi Arabia approved the deal earlier this week.

🍿 Netflix brings on director and writer for “BioShock” film adaptation (Justin Kroll / Deadline)

The highly anticipated feature film adaptation of the popular game series “BioShock” now has a writer and director. Netflix has hired director Francis Lawrence, known for his work on the “Hunger Games” franchise and “I Am Legend”, and writer Michael Green (“Blade Runner 2049” and “Logan”) to the film. It’s one of many upcoming video game-based Hollywood productions, alongside the likes of “The Last of Us” (HBO) and others.