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MarketWatch First Take: Crypto boom is just the icing on top of a sweet year for Nvidia

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Nvidia Corp. is heading toward such a great year that a crypto-focused business potentially on a more-than-$1 billion annual run rate is seen as just extra icing on the celebratory cake.

Nvidia
NVDA,
+0.33%

blew past Wall Street estimates Wednesday with record quarterly revenue of $5.66 billion, 84% higher than the previous year. Its two core businesses both experienced huge growth — gaming sales surged 106% to $2.76 billion and data-center revenue rose 79% to $2.05 billion.

With gamers battling to buy whatever gear they can get their hands on in the middle of a semiconductor shortage, Nvidia expects the growth to continue. Chief Financial Officer Colette Kress forecast revenue of $6.3 billion for the second quarter at the midpoint, growth of approximately 63% that would lead to yet another record sales quarter.

The biggest growth could be in crypto, however. Nvidia introduced crypto-mining-specific graphics cards in an attempt to avoid the cycle of boom-to-bust the last time its products were adopted en masse by miners, and sold $155 million worth last quarter, three times as much as Kress projected in the last earnings report.

In an interview with MarketWatch on Wednesday, Kress confirmed a forecast for more than twice that much — $400 million in sales in the current quarter — while stressing that Nvidia’s focus is on supplying the needs of its core consumer customer, gamers.

“We have a market that will not interfere with the supply for GeForce,” Kress said, referencing Nvidia’s gaming cards. “If [cryptocurrency-mining processors] went away or if crypto mining went away, it would be fine with us, we have some amazing core businesses.”

In other words, a business with annualized sales of more than $1 billion would be just a luxury for Nvidia, which would have sold more chips if it had more supply, across the board. “As we move to the second half of year, we will hope that we can get more in line with where demand is,” Kress said.

The success was also thanks to its data-center sales. “Hyperscale” data-center customers like Amazon.com
AMZN,
+0.19%

are buying the company’s graphics processors for their artificial-intelligence capabilities, and Kress said Nvidia’s data-center offerings could find new orders after a refresh during the pandemic.

“As things open up, there is a lineup of products that we have launched that are in their super early days,” she said.

The revenue-growth rate could slow a bit as Nvidia laps the closing of its Mellanox acquisition from April 2020, Kress noted, while stressing that “Growth is still there, both sequentially and from a year-over-year perspective.”

The only potential sour taste lies in doubts about the company’s still-pending $40 billion acquisition of ARM Holdings Plc, which is under regulatory review in the United Kingdom. While Kress said the company cannot comment on the review process, she noted that Nvidia is working with regulators to inform and help them understand the transaction. She said the company still believes the deal is on track to close in early 2022.

It may be hard for Nvidia’s stock to appreciate from here, after a strong move in the wake of its stock-split news last week left it just shy of all-time highs; in after-hours trading, shares of Nvidia, which are up nearly 80% in the past year, slipped around 1%. The other numbers affiliated with Nvidia are stunning, however.

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