The teflon stock of 2021, Nvidia (NVDA), is showing a few tiny cracks in its armor as Wall Street frets over how bitcoin's price plunge into a crypto winter will impact demand for the tech giant's mining gear for the rest of the year.
But fear not, says Bank of America analyst Vivek Arya.
"Crypto fears are overstated," Arya says, pointing to price weakness for Nvidia's Ampere graphic processor unit as fueling those fears on demand.
Arya cites three factors in his latest call:
"Most Ethereum miners are buying Nvidia's crypto-specific CMP SKU [graphics cards for professional miners] as it provides the most cost-effective option (especially as GeForce retail prices are 2-3x higher than MSRP) and has more availability (based on older-gen so doesn't take capacity from newer products).
Nvidia's actions regarding CMP and de-hashing GeForce chips has effectively ring-fenced mining demand and helped to bring down retail prices by over 40% from recent peaks.
We are still in very early stages of Ampere ramp (5.5% penetration well below typical 40-60% upgrades in each new generation) suggesting plenty of room to grow which is very different than 2018/2019 crypto bubble when Nvidia was at the tail-end of its Pascal gaming cycle and there were no supply shortages."
Arya has a $900 price target on Nvidia, assuming 10% upside from current levels. The analyst sees Nvidia doubling its content and tripling its data center sales over the next few years.
Despite the ongoing analyst optimism on Nvidia (also in part fueled by the potential to close on the $40 billion deal for Arm), the stock has taken a small hit of late with crypto prices staying under pressure.
From the record highs of more than $63,000 in mid-April, bitcoin (BTC-USD) has shed about 50% (including a trip below the $30,000 level). Major sell-offs have spread to other top cryptos such as dogecoin and ethereum amid fears of regulator crackdowns in the U.S. and China.
Bitcoin prices currently trade at about $35,000.
The sweeping crypto sell-off has hit stocks trade seen tethered to bitcoin's future.
Coinbase shares are down about 30% over the past three months, while Square shares are only up 4.3% (lagging the Nasdaq's 7% gain). Nvidia's stock has generally stayed firm amidst the crypto rout, but is down about 2% from their recent record highs.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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