Softbank to Divest NVIDIA Stake As Crypto Chips Investments Turn Sour

Softbank is planning to offload its entire stakes in chip giant Nvidia. The sell-off will reportedly take place early next year. According to people with knowledge of the matter, the sell-off is not because of the downtown in the cryptocurrency sector.

Softbank-Nvidia Sell-off

Softbank is essentially moving to trim its exposure in the sector, NVidia having turned bearish in recent months. The Japanese company bought the stakes mid last year and later on transferred them to its investment vehicle Vision Fund.

Shares of Nvidia have come under immense pressure in recent months. The stock is already down by more than 40%, from October highs, the broader stock market having turned bearish in response to the U.S-China trade wars.

NVIDIA is one of the chip giant’s that expanded its footprint into the cryptocurrency space in response to the crypto boom experienced last year.  The expansion drive saw the company produce chips used to power some of the crypto mining equipment.

Cryptocurrency Implosion

An implosion in cryptocurrencies prices in recent months has essentially resulted in a significant reduction in returns from crypto mining. People and companies are no longer generating as much Money as they used to when Bitcoin was trading at record highs.

Uncertainty in the cryptocurrency sector has essentially forced a number of companies to rethink their strategy. Cryptocurrencies have lost nearly two-thirds in market value, amidst growing concerns about a potential bubble burst in the sector.

NVIDIA has already shelved its focus of the cryptocurrency market in response to the recent turmoil. Just like other companies, the chip giant attributes the change of plan to the downward trend of cryptocurrency prices.

Gaming Graphics Chips Oversupply

NVIDIA’s graphic chips mostly used in gaming machines had found a new market in the crypto mining business. However not anymore as demand has continued to edge lower as fear continues to grip the cryptocurrency sector.

“Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward,” said Nvidia CFO Collette Kress.

Cryptocurrency implosion is not the only thing that has hurt NVIDIA sentiments in the market.  Despite being the largest gaming graphics maker, NVIDIA has seen its prospects in the sector thwarted by an oversupply in gaming chips in the market.  The chip giant has already had to slow down its supply in the market a move that has forced it to lower its fourth-quarter guidance.