Japanese telecom giant and one of the prolific global investors – SoftBank – may offload its stake in chipmaker Nvidia Corp by early next year, according to Bloomberg. SoftBank may end up making a healthy profit of $3 Bn from this exit, Bloomberg claimed after citing a anonymous source. However, it is still not clear whether Japanese giant is likely to settle for a partial or complete exit from the chip making company.
As per the analysts, SoftBank may have been forced to rejig its investment strategy in Nvidia due to continuous slide in latter’s share price in the recent months. The recent uninterrupted decline in Nvidia’s share price has caused significant erosion in company’s market valuation. As per the rough estimates, the valuation of the silicon valley based company currently stands at approximately $90.9 billion.
SoftBank had almost secretly invested $4 Bn in Nvidia in early 2017, making the Japanese firm the fourth largest investor in the chip manufacturing company. It had later transferred the holding in SoftBank’s vision fund, which is a dedicated fund set up by the Japanese conglomerate to invest in promising global tech startups.
What is really causing decline in Nvidia’s fortunes?
The recent steep decline in Nvidia’s fortunes largely owes to lower forecasts of its data-center sales, which contributes significantly to company’s bottom line. RBC analyst Mitch Steves forecasted in a note on Wednesday that Nvidia’s data-center revenue growth to between 25% and 30% year-over-year basis in the coming quarters. This is a steep fall of 40% to 60% in y/y revenue.
If we combine these lower forecasts with Nvidia’s highly disappointing third quarter results then investor’s concerns don’t appear to be completely misplaced. Nvidia’s third quarter results that were announced last month ended up missing analyst’s expectations by substantial margin. This was largely due to declining sales of mining GPUs for cryptocurrencies.
Analysts have predicted that chipmaker’s crypto problems will persist longer than expected, which has further added to investor’s concerns.
Nvidia’s share ended at $148.90 in NASDAQ on Tuesday, an increase of 0.48% from the previous day’s trading.