Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Investors Need to Decide If They’re in Nvidia (NVDA) Stock for the Long Haul

By Gene Munster

Shares of Nvidia (NVDA) are down 19%. While the near-term is ugly, the long-term story is intact.

  • Nvidia missed Oct-19 revenue by 2%.
  • The biggest miss occurred in its gaming segment. Crypto miners have been using gaming products for mining cryptocurrencies. As the price of cryptos has fallen, fewer graphics cards have been purchased.
  • Despite Nvidia’s inability to accurately segment mining from gaming, we believe the underlying gaming demand remains healthy.
  • Nvidia guided Jan revenue 15% below street expectations as it cleans up channel inventory from declining crypto mining interest.
  • The bottom line: crypto has been a bigger part of the recent upside, and now the downside, than we or the company thought. As crypto has fallen off, unwinding the channel inventory had a significant (15% on overall revenue) negative impact on Jan (and partially Apr) expectations.

Guidance Reveals Failure to have Accurate Pulse on the Business

Oct-19 results and Jan-19 guidance caught investors and the company off-guard, which causes us to question the company’s channel inventory management, along with visibility into which segments are driving overall results. For example, crypto declines are the reason for the disappointing guidance, but embedded in this is the company’s failure to recognize the greater positive impact that crypto was having on the way up (late 2017, early 2018). Most concerning about guidance was the commentary on last quarter’s conference call, suggesting that crypto would not be factored into guidance for the Oct-19 quarter. Simply put, the company failed to have an accurate pulse on their business. Undoubtedly, January guidance will weigh on investor confidence at least for the next quarter. Near-term (three months), Nvidia is a “show me” story.

Measurable Setback, but Long-term Story Still Intact

Long-term, we continue to believe that the company will be one of the key beneficiaries of three massive tech waves, including gaming, datacenter, and automotive.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. 


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