Nvidia Wows but Competition Lurks

First-quarter sales increased 66% year-over-year and 10% sequentially to a record $3.2 billion. Nvidia’s main breadwinner, gaming, was up 68% year over year and down 1% sequentially to $1.7 billion, as its GPUs continue to garner impressive demand both in gaming PCs and the Nintendo Switch. Cryptocurrency-related GPUs generated $289 million in sales, categorized in the OEM bucket, but we question how accurately this figure captures Nvidia’s true cryptocurrency exposure. We think a portion of GPUs sold in the gaming channel actually go to cryptocurrency mining or data center acceleration, thus artificially inflating the growth figures. While this could suggest the data center figure is higher, we remain skeptical on the long-term sustainability of Nvidia’s GPUs for cryptocurrency mining, particularly as cryptocurrency prices have fallen recently. If the secondary market gets flooded with GPUs previously used for mining, Nvidia and AMD’s GPU businesses (especially in gaming) would be severely impacted, in our view.

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