Bitcoin's slump is causing a big headache for one of Silicon Valley's top tech firms.
Computer chipmaker Nvidia's stock plunged nearly 17% in after hours trading on the Nasdaq on Thursday, after the company's third quarter financial results came in significantly lower than expected.
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Nvidia (NVDA) specializes in making hardware for video game consoles and digital currency mining, the process by which computers are used to create bitcoin and other cryptocurrencies by solving complex math problems.
But bitcoin prices have more than halved this year after a spectacular rally in 2017. That has hit demand for Nvidia's technology, the company revealed Thursday, causing unsolved inventory of its products to pile up.
"The crypto hangover lasted longer than we expected," Nvidia CEO Jensen Huang said on a conference call with investors Thursday.
Things could get worse before they get better, with the price of bitcoin recently falling to its lowest level in a year. Nvidia said for the current holiday season quarter it now only expects to record revenues of $2.7 billion, compared to analyst forecasts of about $3.4 billion.
Nvidia isn't the only big US tech firm to suffer as a result of the crypto rout.
Rival chipmaker AMD (AMD) reported lower than expected earnings last quarter, blaming the cryptocurrency slump for a slowdown in sales. The company said it expects revenue to fall below analyst expectations in the current quarter as well.
AMD's stock was down about 5% in after hours trading.
Nintendo is a major customer of Nvidia, and any sign that Nintendo is buying fewer chips makes investors worry about demand for its own gaming systems, said Pelham Smithers, head of UK-based investment firm Pelham Smithers Associates.
Founded in 1993, Nvidia started off selling computer cards that improved the performance of video games. But it's since expanded into bigger and pricier areas. Today, one Nvidia product, the DGX, can cost as much as $149,000.
Among Nvidia's key backers are Japanese tech giant SoftBank, whose $93 billion Vision Fund holds a sizable stake in the firm.
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