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Nvidia: Stock of the Week

Crypto moves on from graphics cards, hurting Nvidia results.

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Andrew Willis: Bitcoin and other cryptocurrencies have been calling it quits with graphics cards for mining purposes, and we’re likely seeing the fallout from the breakup in Nvidia (NVDA) stock. But the relationship was never meant to be.

First of all, much of the ongoing split between crypto and Nvidia’s GPUs has been blamed on the fall of crypto prices to multiyear lows. But that’s not entirely the case. The truth is, they’re kind of bad for each other, with graphics cards inefficient compared to increasingly used purpose-built mining hardware, buyers pricing out gamers, and crypto getting a bad rap for the wasted electricity. 

If there weren’t enough headwinds for GPU crypto miners already, they still have to contend with the increase in mining difficulty affecting both bitcoin and ethereum networks. It also makes you wonder: If difficulty increases with the power of miners, and difficulty is high today, how much has crypto already moved onto specialized hardware?

Nvidia’s Gaming Segment Revenue Declines

Nvidia’s second-quarter results provide some clues about GPU demand, with its gaming segment down 44% over the last quarter and 33% over the last year. Sector strategist Abhinav Davuluri had been anticipating a slowdown, with a crash in crypto prices contributing to the decline that may continue for a few more quarters.

Investors instead might want to keep an eye on Nvidia’s data centre business, which appears to be a match made in heaven, as sales are up 61% year over year. There’s also a potentially lucrative role in self-driving vehicles and the metaverse, and there could just be a return to graphics cards for gaming.

For Morningstar, I’m Andrew Willis.

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Andrew Willis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.