Saturday, 19 September 2020

Nvidia: VC Firm Loup Ventures Lauds Potential for Custom Chips

Former Piper Jaffray analyst Gene Munster, now a venture capitalist with Loup Ventures, offers up today another of his frequent missives on tech companies. This one about Nvidia (NVDA), a chip maker that is going to figure in a big way in artificial intelligence, autonomous vehicles, virtual and augmented reality, and Bitcoin and other crypto-currencies.

Munster, who used to cover Apple (AAPL), deems Nvidia’s chips to be “an integral part of the future of technology."

He sees several things that can push Nvidia’s stock up, by contributing to revenue growth of 25% per year, compounded annually, through 2023. (Most estimates on the Street having Nvidia’s revenue rising 36.6% this fiscal year, 15.6% next year, and 16.3% the year after, before inexplicably jump to 28.8% growth in 2021 and 52.8% growth in 2022, according to FactSet.)

Interestingly, Munster cites a lot of stuff mentioned by others, including a surge in chips for data centers — it may make up more than a third of Nvidia’s revenue by 2023 — and the surge of autonomous vehicles running on Nvidia silicon.

But he also discuses custom chips, so-called application-specific integrated circuits, that Nvidia could design for the purposes of mining and other activities in crypto:

Lastly, Nvidia is poised the benefit from the continued growth of cryptocurrencies […] Miners often turn to GPUs for the necessary processing power to complete blocks on the blockchain. […] Miners rely on GPUs to provide a cryptocurrency network with the necessary processing power to function. As a particular cryptocurrency is mined (with GPUs), customers will ask for specific ASICs to be built by companies such as Nvidia (positively impacting OEM and IP). As these custom ASIC components are deployed, the specific coin’s mining market becomes monopolized, and forces smaller miners to move a different currency in order to remain profitable. The smaller miners will turn back to GPU-based solutions (positively impacting Gaming) before the cycle repeats itself. Because of this ebb-and-flow and the volatile nature of cryptocurrencies, modeling the impact of cryptocurrency mining is difficult. While highly speculative and volatile, we feel that cryptocurrencies will be a part of the future. We are modeling OEM and IP business to grow by the low single digits in the future.

Nvidia shares today closed down 97 cents, or half a percent, at $214.93.


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