Why Nvidia Stock Fell on Friday

What happened

For the fourth day in a row, semiconductor stock Nvidia (NASDAQ:NVDA) fell in trading today — and was down 2.6% as of 10:30 a.m. ET.

Granted, it kind of feels like all the Nasdaq stocks are falling today as investors shed riskier assets. But in Nvidia’s case, there may be a more specific reason.

So what

While still at its core a graphics chip manufacturer, in recent years Nvidia’s chips have become increasingly popular for use in cryptocurrency mining. Problem is, cryptocurrencies are flagging today, with Bitcoin, for example,  down nearly 12% over the past 24 hours and Ethereum falling nearly 15%.

This sell-off in cryptocurrency is of course part and parcel of the broader sell-off in risky assets in the stock market. But Nvidia’s special exposure to crypto means it may be especially hard hit as cryptocurrency mining suddenly becomes less popular. (Because nobody wants to buy expensive chips so they can mine a depreciating asset.)

Now what

And things could get worse before they get better. As CNBC reports this morning, the yield on U.S. Treasury bonds continues to move higher (meaning that investors can get more money from investing in “safe” bonds and will be less tempted to seek out returns in riskier assets). Meanwhile, cryptocurrencies face increasing pressure from government regulation.  

China banned cryptocurrency transactions within the Middle Kingdom last year, as you recall. The United States government is tightening its regulations as well. And in a well-telegraphed move, it appears that Russia — currently one of the top three countries producing Bitcoin — is finally going to proceed with its threat to ban crypto mining within its territory. In order to protect “financial stability and monetary policy sovereignty,” the Russian Central Bank just proposed banning both crypto mining and crypto use.

And the less popular cryptocurrencies become, the worse the news could become for Nvidia stock.