Nvidia: Crypto Surge Could Fuel Demand for GPUs

Cryptocurrencies are once again a hot topic. Naturally, Bitcoin has led the way - its price has climbed to constant new all-time highs over the past weeks. But, hot on its heels, as is customary in the space, the rally has extended to other cryptocurrencies.

While bitcoin is known for its wild swings of volatility, it is actually the steadiest crypto of the lot. Its peaks and troughs are relatively tame compared to other lower capped coins and tokens. Now as the whole space is joining the fray, there could be a lot of upside on offer. The price of Ethereum, for example – second only to bitcoin by market cap – currently stands at $1,190 and could be headed further north. Mining it requires top of the line GPUs.

This should be good news for Nvidia (NVDA), says RBC analyst Mitch Steves.

The company sells the high-end GPUs used to mine crypto and secure the networks – and apart from Ethereum, other currencies such as Monero, Grin, Horizen and Zcash all make use of Nvidia’s offerings.

With the price of Ethereum surging upwards, the 5-star analyst thinks “demand for high-end GPUs (new version) will remain robust through Q1 (assuming the price remains at ~$1,000).”

“This is important,” Steves adds, “As the payback period on a NVDA 3080 is roughly 27-30 days while the payback period of purchasing a 2080 unit (older version) would be ~80-83 days by our current estimates. This is a significant difference in time frame (nearly 3x faster payback time) and the newer chips could be resold closer to retail value in the used market vs. legacy products in our view... Net Net: we're flagging that crypto demand will likely remain in Q1 potentially creating an elevated gaming number for the industry.”

There’s a caveat, though. Ethereum 2.0 mainnet is approaching, when Ethereum will transition from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS), which means no GPUs will be needed for mining, thereby removing this revenue stream at some point.

Against this backdrop, Steves reiterates an Outperform (i.e. Buy) rating on NVDA shares, along with a $610 price target. Investors stand to pocket a ~15% gain should the analyst's thesis play out. (To watch Steves’ track record, click here)

Most of Steves’ colleagues agree. Based on 14 Buys, 3 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. The projection is for 18% upside in the coming months, given the average price target stands at $596.65. (See Nvidia stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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