Cryptocurrency, Autonomous Vehicles and Energy Efficiency Key to NVIDIA’s Growth

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There was a lot to unwrap (and a lot to love) from NVIDIA (NASDAQ: NVDA) fourth quarter earnings report. The company’s 61% year-over-year revenue growth, driven by record video game and data center sales, grabbed the headlines. But NVIDIA is also taking advantage of other trends in the economy, namely cryptocurrencies, autonomous vehicles and energy efficiency. Here’s why it matters.

Separate game hardware from crypto hardware

Cryptocurrency prices have skyrocketed over the past year, along with renewed interest in “mining” (simply, when a computer is used to create more cryptocurrency). NVIDIA’s graphics processing units (GPUs) are designed for high-end video games, but they are programmable and ideal for handling cryptocurrency work as well. So, it looks like a lot of commercial miners have started buying NVIDIA’s new RTX 30 series GPUs and added to the massive demand the company has seen since announcing the new processors last fall.

Image source: Getty Images.

The demand is good. But the last time there was a digital currency price boom like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETC) A few years ago, the ensuing fall in crypto prices took NVIDIA’s stock with it as its GPU sales slowed. Management wants to make sure their RTX 30 series GPUs end up in the hands of gamers, not crypto miners, so they’ve lowered the hash rate (the processing power for a cryptocurrency network). on its RTX 3060 (the cheapest GPU in its 30 series) by half to discourage its use in this manner.

That’s not to say NVIDIA leaves miners out in the cold, however. He simultaneously released a new chip specific to crypto miners: the CMP, or Cryptocurrency Mining Processor. This will help millions of gamers around the world to line up for an RTX 30 series GPU and meet the demand of commercial miners for digital currency. As CFO Colette Kress explained during the earnings call:

Since our GPUs are sold to graphics card manufacturers and then to distribution, we do not have the ability to accurately track or quantify their end use. Analyst estimates suggest that crypto mining contributed $ 100-300 million to our fourth quarter revenue, a relatively small portion of our fourth quarter gaming revenue.

CMPs will start shipping in March and give NVIDIA greater clarity on where their hardware is being used. Kress said CMPs could generate around $ 50 million in revenue in the first quarter, a significant sum for a brand new chip launched two-thirds of the new quarter. Digital currency is gaining momentum and adoption is growing, so this move bodes well for NVIDIA in the long run.

What’s up with the automotive segment?

NVIDIA thought outside the box with its fourth quarter report, but all was not perfect. Its automotive segment revenue ($ 145 million, just under 3% of total sales) fell 11% from a year ago. What happened to NVIDIA, the leader in autonomous vehicles and advanced driver assistance systems?

First of all, it’s important to keep in mind that this segment is in decline as the company has chosen to end its traditional infotainment business. But its AI cockpit and self-driving software development are gaining momentum. Kress said on the call that NVIDIA is increasing the list of electric vehicle manufacturers who adhere to its NVIDIA DRIVE platform for autonomous vehicles. Mercedes-Benz also signed a major deal last year to expand its use of AI cockpit technology. Kress explained, “We are at the start of an important opportunity. We have built a multi-billion dollar design pipeline for our autonomous AI cockpit solutions, which will result in a significant revenue inflection over the next few years. ”

Since the automotive segment only generated $ 536 million in sales last year, this new business pipeline will be significant. Investors’ patience will pay off here, as electric and autonomous vehicle technology gradually gains momentum.

Cloud computing is synonymous with energy efficiency

Much has been said about the poor state of the country’s energy network. Reducing renewables and the carbon footprint is gaining momentum, and it looks like the Biden administration will back those efforts. NVIDIA could be a beneficiary here.

Computing power increases, but with higher computing power, power consumption increases. However, NVIDIA’s data center hardware (which is implemented at a rapid pace to handle AI and other data-intensive tasks) doesn’t just act as an IT accelerator. Its next-generation cloud computing devices are also energy efficient, and Kress said a growing list of companies are using NVIDIA to embrace cloud computing. and meet climate change targets.

As an example, Kress said that the NVIDIA A100 (the GPU at the heart of its data center business) “performs AI calculations with one-twentieth of the power consumption of processors” – or central processing units. processing, the old general industry standard computer chip. In this new era of cloud computing, the A100 gives NVIDIA an edge not only in computing power, but also as an auxiliary game on climate change and reducing power consumption. With a new round of data center hardware upgrade just underway, this division is expected to continue to grow for the foreseeable future.

NVIDIA is rapidly emerging as the leader in next-generation semiconductors and computing systems, and the fourth quarter report reinforces this. The company is contributing to pioneering technological advances on many fronts as a new era dominated by cloud computing and AI dawns. The reasons for staying invested for the long term keep growing.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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