What’s in Store for NVIDIA’s Cryptocurrency Business in 2022?
Best Cryptocurrency App: The GPU specialist profited from the healthy crypto market in 2017, though there are both negative and positive factors that could affect its sales of GPUs for mining digital currencies in 2018.
For upon|NVIDIA ( NVDA -3.48% ) had another great year in 2017, with its return of 82% far outpacing the S&P 500‘s 22.8%. The stock’s performance reflects the company’s strong financial results and investor confidence in NVIDIA’s future. The bulk of the company’s growth during the calendar year 2017 can be attributed to solid to stellar performance in its four target market platforms: computer gaming, data center, professional visualization, and auto. Best Cryptocurrency App.
However, NVIDIA’s results also received a notable boost from the astronomical rise in cryptocurrency prices in 2017. The company’s graphics processing units (GPUs) are used to “mine” — or generate — certain digital currencies.
What’s in store, then, for NVIDIA’s cryptocurrency business in 2018?
Image source: Getty Images.
NVIDIA’s cryptocurrency revenue during (calendar year) 2017
For background, cryptocurrency is a digital currency that uses cryptography for security and operates independently of a centralized bank. Bitcoin is the oldest cryptocurrency and the largest by market cap, Ethereum is the second-largest, and there are numerous newer and smaller cryptocurrencies. Best Cryptocurrency App.
NVIDIA’s CFO has shared two metrics relating to the company’s crypto business: revenue generated from sales of application-specific graphic boards, or GPUs, in the company’s second and third quarters of fiscal 2018, the latter of which ended in late October. Best Cryptocurrency App.
| Period | Known Crypto Revenue (Within OEM and IP Category) | Total Revenue | Known Crypto Revenue As a Percentage of Total Revenue | Total Crypto Revenue (Estimate)* |
|---|---|---|---|---|
| Fiscal Q3 2018 |
$70 million |
$2,636 million |
2.7% | 3% to 3.5% |
| Fiscal Q2 2018 |
$150 million |
$2,230 million |
6.7% | 7.5% to 9% |
Data source: NVIDIA. *Author’s rough estimates based on comments by the CEO.
NVIDIA’s total revenue from crypto sales in the past two quarters is greater than 6.7% and 2.7%, but we can’t know by how much. That’s because the company can’t know how many people are buying its GeForce gaming cards to use for mining cryptocurrencies, rather than buying the graphics boards it specifically designed for mining. Best Cryptocurrency App.
CEO Jensen Huang said on the Q2 conference call that the company believes the “large majority” of people who are using its products for mining are buying the application-specific GPUs. If Huang’s statement is accurate, it’s probably safe to say that total sales to crypto miners accounted for about 7.5% to 9% of total revenue in the second quarter and roughly 3% to 3.5% in the third quarter. Best Cryptocurrency App.
What can investors expect from NVIDIA’s cryptocurrency business in 2018?
As things stand with the price action in the crypto world, the middle ground of quite bearish and bullish stances seems probable. On the negative side, assuming Ethereum’s market cap continues to grow, NVIDIA’s GPUs will become less and less effective at mining them. That Ethereum grew considerably from the second to the third quarter is surely the reason NVIDIA’s sales of its application-specific boards cooled off during this period, as the preceding chart shows. Best Cryptocurrency App.
NVIDIA’s GPUs are generally considered ideal for mining newly emerging cryptocurrencies that require mining. However, once such a digital currency gets large, someone will build an application-specific integrated circuit to mine it and others will increasingly follow suit, thus making GPUs second-rate at mining that particular digital currency. Best Cryptocurrency App.
A cryptocurrency mining rig, with graphics cards is shown. Image source: Getty Images.
Currently, Ethereum’s creator, Vitalik Buterin, and the cryptocurrency community are planning to do a hard fork to make a transition from Ethereum using a Bitcoin-like proof-of-work (POW) protocol to their “Casper” version of a proof-of-stake (POS) protocol. Unlike POW, the POS protocol doesn’t require mining. So if this change is made, NVIDIA’s crypto business could decline even more. Best Cryptocurrency App.
On the positive side, the overall cryptocurrency market has been booming since late 2017, which is no doubt already encouraging folks to launch new digital currencies. And NVIDIA’s GPUs should be a top tool for mining some of them. Certainly, the crypto market can be expected to remain very volatile, which means that launches of new digital currencies will probably be, too. So NVIDIA’s crypto revenue is likely to be very lumpy from quarter to quarter. Best Cryptocurrency App.
Don’t lose sight of the forest for the trees
Wall Street is focused on the short term, which is why analysts are giving NVIDIA’s cryptocurrency business a lot of attention. However, investors with a long-term view shouldn’t concern themselves much with this topic.
Certainly, it would be great for NVIDIA to keep benefiting from the crypto market — and investors should, indeed, keep seeing at least a small boost, according to Huang — but NVIDIA doesn’t need any crypto business to be a long-term winner. The company has irons in many of today’s hottest tech trends, including artificial intelligence (AI), driverless cars, computer gaming/esports, and virtual reality (VR). Best Cryptocurrency App.
Where to invest $1,000 right now
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and NVIDIA Corporation made the list — but there are 9 other stocks you may be overlooking. Best Cryptocurrency App.
The article was originally published here.
Comments are closed.