Nvidia’s stock has been going strong, hitting a record-high of more than $260 earlier this week—more than double its price a year ago. However, after the company’s recent earnings report, investors and analysts are skeptical on whether growing sales of Nvidia’s graphics chips can offset the possible drop in sales to cryptocurrency miners.
Nvidia disclosed on Thursday after the market close that its first quarter revenue went up to 66% to $3.2 billion, and its adjusted net income per share increased by two-fold to $2.05, beating the average estimate.
However, a deeper look would reveal that Nvidia’s sales to datacenters, which generally use the graphic chips for AI apps and machine learning, only reached $701 million, less than the expected target. The company also revealed that the volatile sales to customers that mine digital currencies equaled $289 million.
Several investors expressed concerns that with the decline of digital currency prices, mining activity—running large-scale complex computing calculations—could decline as well. Furthermore, some Asian chipmakers are slated to release more efficient and specialized mining chips that could soon take a way some of the business from Nvidia and its rival Advanced Micro Devices (AMD). As of now, Intel does not make the kind of graphics chips used in cryptocurrency mining.
“Looking into Q2, we expect crypto-specific revenue to be about one-third of its Q1 level,” CFO Colette Kress said.
Nvidia shares were down 1% to $257.71 on Friday’s midday trading.
“Cryptocurrency mining continues to inject noise into an overall very strong growth story,” Joe Moore, analyst at Morgan Stanley, wrote in a report on Friday, adding that demand from miners contributed to about half of the surprise extra income that was beyond analyst’s expectations according to Nvidia. However, the company’s strong growth in other subjects should prevail any decline in business, Moore said.
Bernstein Research analyst Stacy Rasgon suggested that investors should stop worrying too much on the impact of crypto sales.
“There was very little to nitpick on regarding execution and as numbers continue their inexorable march higher we continue to believe the story has legs,” he wrote.