Jensen Huang, CEO of Nvidia, presenting at CES in Las Vegas. Nvidia is now dealing with months of expensive inventory of graphics cards.

Jensen Huang, CEO of Nvidia, presenting at CES in Las Vegas. Nvidia is now dealing with months of expensive inventory of graphics cards.


rick wilking/Reuters

At the height of the cryptocurrency boom, when even moms in British Columbia were stockpiling videogame graphics cards to generate digital currency, average gamers couldn’t get their hands on their favored hardware. Prices ballooned and inventory vanished.

Those days are over. But inflated prices have taken longer than expected to come down, says


NVDA -18.76%

, particularly for its moderately powerful chips built on an architecture it calls Pascal.

Nvidia misjudged how quickly prices for the graphics cards that those chips go into would normalize now that cryptocurrency mining isn’t as hot, and the company is now dealing with months of expensive inventory that price-conscious gamers won’t touch.

Hampering the problem of excess supply is a larger-than-normal secondary retail market for graphics cards, said Pierre Ferragu, analyst at New Street Research. Typically inventory levels on sites such as


and Amazon are smaller than those of dedicated electronic retailers, but now secondary sellers are equally as flanked by excess inventory. “Crypto miners have all these cards and just do not know what to do with them,” Mr. Ferragu said.

The company’s message to Wall Street: Videogaming is fine, and the crypto hangover is lasting longer than expected. Still, some analysts don’t see a quick fix.

“The real recovery won’t take place until the second, third and fourth quarters of fiscal 2020,” said Gary Mobley, analyst at Benchmark. “It’s 12 weeks of inventory out there we’re dealing with.”

A key reason why the market will take a while longer to rebound is the first half of the calendar year tends to be slow for the graphics-card industry, since most big-budget games are released ahead of the holidays, said Craig A. Ellis, senior managing director of B. Riley FBR. The firm downgraded Nvidia to “neutral” from “buy.”

“The magnitude of the channel inventory issue is significant,” he said. “They are taking significant corrective action, but there is some risk that inventory cleanup will linger.”

The inventory fumble helped wipe around 17% from shares Friday. On Thursday, Nvidia reported fiscal third-quarter 2019 profit that surged 47%, while revenue rose 21%. Neither satisfied Wall Street, nor did the company’s forecast that revenue for the current quarter could decline about 7% from $2.91 billion a year earlier.

Nvidia declined to comment beyond what Chief Executive Jensen Huang told analysts Thursday, that prices fueled by crypto miners are taking longer to drop than expected.

Nvidia’s gaming-hardware results, which include sales of cards to people who use them for digital-currency mining instead of games, didn’t live up to Wall Street’s crypto-heightened expectations. The company said it would pause supplying more Pascal cards for at least a quarter to work through existing inventory.

Casual gamers, frozen out of the market months ago by soaring prices, are still slow to return. Philip Doueihi has been holding out on buying an Nvidia card for about a year because prices have been too high.

“I thought prices would have come down by now,” the 26-year-old information-technology worker in Austin, Texas, said. The PC gamer is looking to spend around $400 on cards currently advertised online for $1,000 or more. “It’s like extortion.”

After repeated quarters of explosive growth that propelled its stock price, Nvidia’s forecast for declining revenue in the current quarter sent its stock cratering—a tumble that came on top of already steep declines. The stock is down around 44% from its closing high of $289.36 in early October.

Goldman Sachs

on Friday removed Nvidia from its conviction list, which consists of stocks that represent the most potential for investors. While the firm maintained a “buy” rating, analysts said, “We were clearly wrong on the stock as we underestimated the magnitude of the channel inventory build in midrange gaming GPUs.” GPUs are chips known as graphics processing units.

Still, some analysts are optimistic about Nvidia’s future despite the setbacks, as the chip maker is in three high-growth areas of semiconductors: data centers, automotive and videogaming.

“This company is still doing really interesting technology for those growth markets,” Ruben Roy, a senior analyst at MKM Partners said. “Nothing has changed with that fundamental thesis. The problem right now is how long is it going to take for this inventory to be cleared up.”

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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