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Nvidia Shares Slip as Crypto Mining Sales Impact Clouds Solid Earnings

Nvidia says it is 'hard to determine' the impact of demand from cryptocurrency miners on its gaming business, but forecast solid revenue gains for the current quarter.

Nvidia  (NVDA) - Get Report shares slipped lower Thursday after the chipmaker posted stronger-than-expected first-quarter earnings but noted a degree of uncertainty in predicting the impact of cryptocurrency mining on near-term sales.

Nvidia said revenue from chips used for gaming, which comprise around half of its overall total, rose 106% from last year to $2.76 billion, while sales of its CMP product line - which is only used by cryptocurrency miners - came in at $155 million. Data center revenue was up 79% from last year to $2.05 billion, Nvidia said.

Looking into the current quarter, Nvidia said sales should rise to $6.3 billion, with around $400 million from the CMP line and more increases from gaming sales, but the uncertain impact, and the mining industry's regulatory risk following a renewed crackdown from China, partially clouded the robust outlook.

"It's hard to estimate exactly how much and where crypto mining is being done. However, we can only assume that the vast majority of it is contributed by professional miners, especially when the amount of mining increases tremendously like it has," CEO Jensen Huang told investors on a conference call late Wednesday. 

"The CMP will steer our GeForce supply to gamers. We see strong demand and I expect to see strong demand for quite some time because of the dynamics that I described," he added. "And hopefully, in the combination of those two, we'll see strong growth and through strong growth in our core gaming business through the year."

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Nvidia shares were marked 0.2% lower in early trading Thursday to change hands at $626.75 each, a move that would trim the stock's year-to-date gain to around 19.5% 

Nvidia reported an overall bottom line of $3.66 per share on total revenue of $5.66 billion, topping Wall Street forecasts of $3.29 and $5.4 billion.

The company also said it plans to make headway in its planned acquisition of fellow semiconductor company Arm Ltd, which is facing scrutiny both in the U.S. and abroad.

"The gaming business is very strong, partly helped by crypto, which we peg at around $500 million," said BMO Capital Markets analyst Ambrish Srivastava, who lifted his price target to $750, with an 'outperform' rating, following last night's earnings report. 

"We believe by including a $400 million impact from crypto in F2Q, NVIDIA is trying to provide transparency around the impact," he added. "Datacenter was a touch better, and the large increase in outstanding inventory purchase obligation suggests strength in the business in the second half of the year."