With NVIDIA's 41% Revenue Surge, Some Investors Were Missing the Forest for the Trees
I say it often, but it's worth repeating: Manufacturing is cyclical, and even innovating semiconductor designers like NVIDIA (NASDAQ: NVDA) get hit once in a while. After all, when a new end market emerges, the sales surge creates a supply shortage -- but the inevitable slowdown often leads to a period of oversupply and falling prices.
That's just what happened over a year ago now. Here's a quick recap: Booming cryptocurrency values had crypto "miners" scrambling to build rigs, and NVIDIA's graphics processing units (GPUs) were an ideal fit for creating digital tokens. The problem was that NVIDIA's GPUs could be picked up off the shelf at the local electronics store, making it difficult for the company to tell what was being sold for gaming purposes versus cryptocurrency.
Long story short, a steeper-than-anticipated sales decline ensued once the cryptocurrency bubble popped. A rebound was eventually inevitable, so shares have been in strong rally mode since mid-2019. Many investors have nevertheless been steering clear of the stock, citing high valuation using nearly every metric there is -- except for the future potential of the pioneer. That sales rebound is well underway, and the fiscal 2020 fourth-quarter report is proof that underestimating the power of the GPU is a mistake.
Source Fool.com
