NVIDIA Corp. (NVDA), the graphics chipmaker, blew past Wall Street expectations with its second-quarter earnings results thanks in part to Bitcoin mining, but investors’ fear the company is too reliant on the cryptocurrency craze is taking away from its strong results.
All summer, shares of the semiconductor maker have been rising with the price of the cryptocurrency Bitcoin and, to a lesser extent, Ethereum. The boom in the price of the digital currency has brought more people into the market who are using high-end graphic cards to mine for these digital coins. It has resulted in NVIDIA’s graphics cards becoming sold out and the company gearing up to roll out products specifically for the cryptocurrency market. But while miners, NVIDIA and rival Advanced Micro Devices Inc. (AMD) are betting the cryptocurrency surge has a lot of room to go, Wall Street isn’t so convinced. With Bitcoin hitting an all-time high of more than $3,500 this week, some pundits are warning of a bubble that will eventually burst. In June, Goldman Sachs started coverage of the digital currency, saying its wild ascent may not last for too long. Others have argued the price increases are simply unsustainable. (See also: Goldman Sachs Takes Bearish View on Bitcoin.)
New Rivals to Bitcoin
Still, for every skeptic, there seems to be a supporter of the theory that Bitcoin will march much higher. The latest comes from Fundstrat Global Advisors managing partner Tom Lee who, speaking on CNBC’s “Fast Money,” said Bitcoin has the potential to rival gold as a safe haven asset, putting a lofty potential price tag on the digital currency. “There’s $7.5 trillion worth of gold out there, so gold dwarfs the amount of currency in circulation, and if Bitcoin captures 5% of that alternative currency, it could [be worth as much as] $25,000 to $50,000 a share,” Lee told CNBC. Meanwhile, billionaire entrepreneur Mark Cuban confirmed in June he has plans to participate in an initial coin offering (ICO) just weeks after tweeting that Bitcoin is in a “bubble.” Cuban’s decision came after one of the companies he is invested in, eSports betting platform Unikrn, announced plans to raise funds for a new online coin to rival Bitcoin. (See also: NVIDIA Earns $200 Price Target From B. Riley.)
NVIDIA, not surprisingly, falls into the bullish camp. During a conference call to discuss second-quarter earnings after the close of trading Thursday, Chief Executive Jensen Huang said the cryptocurrency boom is sustainable, pointing to other digital currencies that are growing in popularity. He also noted that startups are launching ICOs instead of turning to venture capitalists to raise money. Huang predicted the market would be huge and said sales for graphic cards to mine for the digital coins will continue to be in demand.
“Cryptocurrency and blockchain is here to stay. The market need for it is going to grow, and over time it will become quite large. It is very clear that new currencies will come to market, and it’s very clear that the GPU [graphics processing unit] is just fantastic at cryptography,” Huang said during a conference call to discuss Q2 results. “This is a market that is not likely to go away anytime soon, and the only thing that we can probably expect is that there will be more currencies to come. It will come in a whole lot of different nations. It will emerge from time to time, and the GPU is really quite great for it.”