On Nov. 16, graphics specialist NVIDIA (NASDAQ:NVDA) disappointed investors when it issued guidance for the fourth quarter of its fiscal 2019 that was well below what analysts had been expecting. The company said in its CFO commentary that its guidance "assumes no meaningful shipments of midrange Pascal GPUs during the quarter, so that channel inventory can approach normal levels by the end of the fourth quarter."
Here, I'd like to explain why NVIDIA's shortfall -- which should show up as a steep decline in the company's gaming business -- isn't going to translate into similar pain for chipmaker Intel (NASDAQ:INTC).
Intel serves gamers, but...
Any gaming-oriented computer requires both a CPU chip -- such as the ones Intel makes -- as well as a graphics processing unit (GPU), such as NVIDIA's.
Intel has been upbeat about sales of its gaming-oriented CPUs for quite some time. For example, CFO and interim CEO Bob Swan said on the company's Oct. 25 earnings call that "our PC-centric business was up 16% [year over year], as we saw continued strength in the commercial and gaming PC segments and grew modem share."
Unfortunately for NVIDIA, it wasn't just gamers buying its gaming-oriented graphics cards. For a while, GPUs like NVIDIA's were popular among those who mine cryptocurrencies. However, the steep decline in cryptocurrency prices coupled with the rise of dedicated chips, known as application specific integrated circuits (ASICs), significantly reduced demand for gaming-oriented GPUs for that purpose.
Put another way, sales of gaming-oriented GPUs were inflated by demand from those looking to mine cryptocurrencies. Now that this demand has evaporated, the distribution channels are so packed with midrange graphics processors that NVIDIA is forced to hold off on shipping such products into those channels, hurting its revenue.
Intel doesn't have this problem. While cryptocurrency-mining computers also required CPUs, mining systems generally consist of a single CPU -- and likely a low-end one at that, since the CPU is simply there to serve as a host for the GPUs, which do all the heavy lifting. In fact, in this guide from PC Gamer on what components to buy for a mining computer, the publication said that a $46 Intel Celeron processor would be just fine for a mining-oriented PC.
It's highly unlikely that Intel's financial results meaningfully benefited from people buying its CPUs for dedicated mining computers. So as cryptocurrency mining fades, Intel's not likely to feel much of a loss. In fact, it's also worth noting that Intel is shifting its production capacity to its higher-end Core and Xeon processors at the expense of lower-end PC processors, such as its Celeron and Pentium line, because demand for its chips is simply greater than its ability to supply them at the moment.
Intel didn't benefit from the cryptocurrency boom as NVIDIA did, but now that the party's over, it doesn't need to cope with the resultant hangover, either.