Nvidia earnings: Cryptocurrency boom could lead to new products
Source: marketwatch.com
Wednesday, Aug 09, 2017 09:07 by InvestingPie

The explosion in new cryptocurrency seems to be boosting graphics-card makers like Nvidia Corp., but acting on the demand is fraught with potential danger.

When Nvidia NVDA, +0.31%  reports earnings for the second quarter of its 2018 fiscal year Thursday, the demand for its graphics cards from cryptocurrency “miners” is expected to be an important topic after reports suggested that there was a run on graphics cards, especially in Eastern Europe and Asia, for use in producing newer forms of the digital currency, notably on the Ethereum blockchain. Nvidia rival Advanced Micro Devices Inc. AMD, -2.90%  admitted in its quarterly earnings report, which beat expectations last month, that demand from the cryptocurrency market was an important factor in its performance, confirming some of the reports.

Also read: AMD earnings gave investors what they wanted, now it must deliver

The question is how or whether to specifically address this market for graphics cards. Analysts point out that there were surges of demand for graphics cards from cryptocurrency miners previously, but that it quickly dissipated. When that happened, many miners sold their cards on the secondary market, which can hamper demand for new cards and could be especially damaging if the companies increase shipments and suddenly have too much inventory.

Media and analysts reported in late June that Nvidia developed cryptocurrency-specific graphics-processing units, or GPUs, for release this quarter. If that is the case, Nvidia would likely announce the move Thursday in a bet that this crypto boom is different, which would be a different approach than AMD is taking.

“Some of our partners are also offering mining specific cards that have a different feature set, such that we’re really segmenting the market between gaming and mining. But it’s important to say we didn’t have cryptocurrency in our forecast, and we’re not looking at it as a long-term growth driver,” AMD Chief Executive Lisa Su said in her earnings call last month.

If Nvidia does jump on the cryptocurrency demand in a more focused way than AMD, it could find yet another road to potential growth, along with its booming server business and autonomous-driving efforts. But if demand suddenly disappears, it could end up with too much inventory and a short-term drag on its other businesses.

What to expect

Other things to look for

Nvidia truly took a leap on Wall Street after its fiscal second-quarter results a year ago showed strong gains in server and automobile revenue, proof that the company’s focus on artificial intelligence was paying off. As we reach a year since then, comparisons will get tougher.

Server growth, which has been huge for Nvidia, could pause as customers await Nvidia’s new Tesla Volta chips, which Chief Executive Jensen Huang showed off for the first time at the company’s annual developers conference in May. Huang handed out some of the first Tesla V100 chips to researchers at an event last month, but the devices are only available for pre-orders currently, and large customers may be putting off purchases until they can get their hands on the new product.

Nvidia’s automobile segment is still waiting for a serious boost from autonomous-driving efforts. Tesla Inc. TSLA, -0.04%  is beginning to produce its Model 3 electric car, which contains Nvidia supercomputers meant to power autonomous driving features, so investors can keep an eye out for early returns from those efforts while they continue to wait for larger revenue expected in the future.

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Very informative
05-03 04:23 by Liam
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