Nvidia (NASDAQ:NVDA) continues its two month slump, losing another 1.24% yesterday. That means the chipmaker is down some 30% from its 2019 highs in early April, and over 50% from its historical peak last fall. The most recent loss is despite rumors that began circulating this week, suggesting the company has a “super” announcement for E3.
With big industry events like Comptex (held last week) and E3 (starting up later this week) seemingly unable to stop the Nvidia stock slide, investors are clearly wary.
NVDA Rumored To Be Planning E3 Spoiler for AMD
E3 is the gaming industry’s biggest annual event, and things start rolling on Thursday with a Stadia Connect event from Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google division. Google’s hotly anticipated new cloud gaming service is powered by custom GPUs from Nvidia’s graphic card rival Advanced Micro Devices (NASDAQ:AMD).
Speaking of AMD, the company is using the E3 stage for the launch of its new 7nm Navi graphics cards. And it appears that Nvidia is determined to play the part of spoiler. A few weeks back, Nvidia began tweeting that something “super” was coming. This week more details began to leak, with TechCrunch publishing a detailed account from an NVDA insider. It looks as though the company will use E3 to announce new “super” versions of its RTX 2060, RTX 2070 and RTX 2080 graphics cards.
These would not actually be new cards, but would refresh the existing versions with improved mesh shading capability, faster clock speeds and faster video memory. With the new versions, Nvidia would then have the option to make them the new default, or the company could also keep the current versions of its cards and mark those down to a lower price.
Either way, Nvidia would take some of the wind out of AMD’s sails at E3. And given that gamers are NVDA’s core customers, the company is clearly betting that E3 is the event where it needs to make a splash. However, based on the continued fall of Nvidia stock price, it appears that investors aren’t impressed.
Too Many Downsides for Nvidia Stock Are Out of Its Control
Competition with AMD is one thing, but the biggest challenges that have hammered Nvidia stock are outside of the company’s control. And they show no signs of getting any better…
Cryptocurrencies like Bitcoin drove Nvidia stock price to record highs, and the collapse of that market has hammered NVDA. When crypto-miners were buying every Nvidia graphics card they could get their hands on, the company literally could not manufacture cards fast enough to keep up with demand. Investors loved it. But when the bottom dropped out of that market, things got ugly fast. When NVDA reported a glut of unsold cards due to the collapse of crypto-mining demand last November, Nvidia stock plummeted 19% in after hours trading.
Making things worse is another huge problem NVDA has no control over. The escalating trade war with China means the threat of tariffs, which raise prices (or lower profits). Graphic cards are in the crosshairs because they are manufactured in China — or at least rely heavily on components manufactured in China — and are also powerful technology that could potentially see export restrictions should the situation escalate further.
Just one tweet from President Trump last month threatening increased tariffs was enough for a 4% drop in Nvidia stock price.
The Bottom Line for NVDA Stock
It’s still early to predict exactly how the market will react to what NVDA plans to unveil at E3. The lead-up has been a continuation of the Nvidia stock slump that started back in April.
However, the company may succeed in firing up gamers. If that happens, it’s possible that we could see an Nvidia stock price rebound over the next week.
But even if it pulls off a successful E3 there is so much going against NVDA — including the collapse of crypto demand and the trade war with China — that a return to 2018 levels is all but impossible any time soon.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
