What happened
Shares of semiconductor pioneer Nvidia (NVDA) were down 4.4% today as of 12:15 p.m. ET. There was no specific news from Nvidia that caused the tumble, but rather ongoing worry that slumping GPU prices could bring down the company's gaming segment.
For the sake of comparison, the Nasdaq Composite Index was down almost 2% on Tuesday.
So what
Nvidia's video game segment has been on a tear for years. In the last quarter, revenue was $3.62 billion, compared to just $1.34 billion two years ago.
But as has occurred in the past, some of this explosion in off-the-shelf GPU (graphics processing unit) sales for video gaming hardware has come from the cryptocurrency market.
Nvidia has taken steps to limit the use of its GPUs for crypto mining with an algorithm that limits computing speed for mining. But that apparently hasn't stopped crypto miners from scooping them up anyway.
However, now that the crypto market has crashed, miners are flooding the secondary market with used GPUs. Additionally, Ethereum (ETH) is moving to a proof-of-stake mining model later this year, a less computing-intensive process that will also likely lower demand for GPUs. As a result, new GPU prices are falling and casting doubt on Nvidia's near-term prospects for continued growth in its video game segment.
Now what
The good news, though, is that Nvidia is about a lot more than video games these days. During the last earnings update, CEO Jensen Huang said there's a solid chance the data center segment continues to grow throughout the rest of this year.
Plus, if Nvidia's chip development road map is accurate, a new generation of video game GPUs (the RTX 4000 series) will be released later in 2022. That could help put a floor under any sag in revenue from the video game segment and keep Nvidia's sales trajectory headed north.
