Even after being crushed last month, cryptocurrency prices are still flying high. Investor interest in the emerging digital currency market remains strong, and Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) prices are up 370% and 1600% respectively since the start of 2020.
This has a real impact on some businesses. NVIDIA (NASDAQ: NVDA) is a prime example. It launched new hardware specifically designed for crypto mining (the process in which digital assets are created and managed) just a few months ago, and sales are skyrocketing.
The crypto industry is notoriously volatile, however, and this has created headaches for NVIDIA in the past. But this is not the semiconductor giant’s first rodeo. This time around, he has a little more visibility on the financial impact of the young crypto market.
A windfall of $ 400 million
NVIDIA announced the launch of a new line of chips called CMP (Cryptocurrency Mining Processor) in February 2021. CMPs are hot start.
NVIDIA CFO Colette Kress said in the fiscal year 2022 first quarter earnings call (NVIDIA’s current fiscal year ending January 2022) that CMP sales were $ 155 million. of dollars. Pretty impressive for a new product launch that has only been available for a few months, even from a leader in the semiconductor industry like NVIDIA.
Despite extremely volatile crypto prices (Bitcoin and Ethereum are each down about 45% from their all-time highs at the time of writing), Kress said CMP sales remain strong. The company projects CMP revenue of $ 400 million in the fiscal second quarter, with the three-month period ending in July 2021.
Could cryptocurrency prices plummet NVIDIA?
While a new chip contributing $ 400 million in quarterly sales is impressive, it’s still a relatively low number for NVIDIA. The company forecasts total revenue of $ 6.3 billion in the current quarter, up 63% year-over-year. CMP would therefore only represent around 6% of sales.
It’s a notable new contributor to growth nonetheless, but it’s still video game and data center GPUs that are the driving force here, not cryptocurrencies. Games and data center sales represented 85% of the total in the first quarter of the year.
The added detail of NVIDIA’s top brass is a nice luxury, though. In 2018, the fall in the prices of Bitcoin and other cryptocurrencies took NVIDIA with them. Although designed for high-end video game graphics, many NVIDIA GPUs are available for purchase from retailers and are programmable for other uses.
One of those important use cases is cryptocurrency mining. Given the lack of visibility into who made retail purchases, it only became apparent after Bitcoin’s refueling that many gaming GPUs were in fact being picked up by crypto miners. And when the price of Bitcoin fell, these miners stopped buying.
CMP therefore represents an important chip product. This helps ensure that the company’s new RTX 30 GPUs end up in the hands of real gamers (RTX 30s can detect Ethereum mining and reduce computing power to make them less appealing to miners, encouraging purchasing a CMP unit instead). It also helps NVIDIA better understand where its products are used, which should help predict future financial results.
This does not mean that RTX 30 GPUs are not bought by crypto miners at all. However, the CMP line is expected to help disaggregate video game sales from other end markets.
Long story short, if crypto price volatility continues and demand for CMP suddenly dries up, investors have a clearer picture of the impact it will have on NVIDIA going forward. While the company takes advantage of the digital currency industry, it is still primarily a video game and data center chip business.
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