A rise in crypto-currencies such as Ethereum is good news for Nvidia (NVDA) investors, according to a note today from RBC Capital's Mitch Steves, who reiterates an Outperform rating on the shares, opining the price rises will propel use of Nvidia's GPUs for as long as prices keep rising.
The "payback period" for crypto-currencies has dropped "materially" with the price increases of the currencies, he writes, including not just Ethereum but also "Monero," "zCash," and Bitcoin. Htye've all risen by 36% or better, and 145% in the case of Bitcoin, just in the last few weeks.
The payback for Ethereum is now around 5.6% months, down from 9.4 months before the rise, writes Steves. These declines in payback period promote use of GPUs for mining, he writes, and "may lead to continued strength in GPU sales" for mining.
Steves opines the move up in the currencies is at least partly a result of institutional money getting into the currencies:
This is a multi-faceted question; however, we think investors are beginning to realize the value that crypto currencies offer. The "cat is out of the bag" so to speak and we wouldn't be surprised to see more and more institutional money and high net worth individuals invest in the rapidly growing space (now a $300B+ market on a fully diluted basis). The lightning network for Bitcoin has made significant progress, the software development team is working on ring signatures for confidential transactions and the Metropolis update for Ethereum was seen as a confidence booster as well. Overall, the technology is progressing at a rapid rate combined with more institutional interest which is likely driving the prices up.
It's hard to know whether the rise will sustain, writes Steves. But he believes "crypto currencies are here to stay." For the moment, he advises investors to "continue to track all crypto currencies that are mined with GPUs over the next 1-2 months as the prices have appreciated materially."
Nvidia shares today are up $1.67, or 0.8%, at $216.60.