Please ensure Javascript is enabled for purposes of website accessibility

NVIDIA Expects Its New Cryptocurrency GPU to Make $400 Million in Fiscal Q2

By Nicholas Rossolillo - May 30, 2021 at 8:37AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yes, $400 million is a big number, but crypto still represents a small piece of NVIDIA's total operation.

Even after getting clobbered in the last month, cryptocurrency prices are still flying high. Investor interest in the nascent digital currency market remains strong, and Bitcoin (BTC -8.98%) and Ethereum (ETH -9.66%) prices are up a respective 370% and 1,600% since the start of 2020. 

This is having a real-world impact on some businesses. NVIDIA (NVDA -4.92%) is a prime example. It launched new hardware designed specifically 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, though, and this has created headaches for NVIDIA in the past. But this isn't the semiconductor giant's first rodeo. This time around, it has quite a bit more visibility into how the young crypto market is impacting it financially.

Someone working on their crypto mining rig made with GPUs.

GPU chips being used in a crypto mining rig. Image source: Getty Images.

A $400 million windfall

NVIDIA announced the launch of a new chip lineup called the CMP (cryptocurrency mining processor) in Feb. 2021. CMPs are off to a hot start.

NVIDIA CFO Colette Kress said on the first-quarter fiscal 2022 earnings call (NVIDIA's current fiscal year ends in Jan. 2022) that CMP sales totaled $155 million. Pretty impressive for a fresh product launch that's only been available for a couple of months, even from a semiconductor industry leader like NVIDIA.

In spite of wildly volatile crypto prices (Bitcoin and Ethereum are each down about 45% from their all-time highs as of this writing), Kress said CMP sales are staying strong. The company is forecasting CMP revenue of $400 million during the fiscal second quarter, the three-month period ending in July 2021. 

Could crypto prices tank NVIDIA?

While a new chip contributing $400 million in quarterly sales is impressive, this is still a relatively small number for NVIDIA. The company is forecasting total revenue of $6.3 billion in the current quarter, up a whopping 63% year over year. CMP would thus be only about 6% of sales.

It's nevertheless a notable new contributor to growth, but it's still video game and data center GPUs that are the driving force here, not cryptocurrencies. Gaming and data center sales were 85% of the total in the fiscal first quarter.

The extra detail from NVIDIA's top brass is a nice luxury, though. Back in 2018, plummeting prices for Bitcoin and other cryptocurrencies dragged NVIDIA along with them. Though designed for high-end video game graphics, many NVIDIA GPUs are available for purchase through retailers and are programmable for other uses.

One such prominent use-case is crypto mining. Given the lack of visibility on who was making retail purchases, it only became apparent after Bitcoin tanked that many gaming GPUs were actually getting scooped up by crypto miners. And when Bitcoin fell in price, those miners stopped buying. 

CMP thus represents an important chip product. It helps ensure the company's new RTX 30 GPUs end up in the hands of actual gamers (the RTX 30s can detect Ethereum mining and cut computing power to make them less desirable to miners, encouraging the purchase of a CMP unit instead). It also helps NVIDIA get more insight on where its products are being used, which should help with forecasting future financial results. 

That doesn't mean RTX 30 GPUs aren't getting bought up by crypto miners at all. However, the CMP lineup should help disaggregate video game sales from other end markets.

Long story short, if crypto price volatility continues and CMP demand suddenly dries up, investors have a clearer picture on how this will impact NVIDIA going forward. Though the company is deriving benefit from the digital-currency industry, this is still first and foremost a video game and data center chip business.

Nicholas Rossolillo owns shares of NVIDIA. The Motley Fool owns shares of and recommends Bitcoin and NVIDIA. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$178.49 (-4.92%) $-9.24
Bitcoin Stock Quote
$21,317.62 (-8.98%) $-2,104.02
Ethereum Stock Quote
$1,689.53 (-9.66%) $-180.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.