Nvidia sales surge as it struggles to keep gaming chips in stock

Nvidia CEO Jensen Huang

Nvidia forecast better-than-expected financial first quarter revenue on Wednesday, with its flagship gaming chips expected to remain in tight supply for the next several months.

As people wait for Covid-19 vaccine roll-outs around the world, stay-at-home orders have kept demand high for chips that speed up videogames. But the Santa Clara, California-based company’s gaming chips have also regained popularity for mining cryptocurrency, a trend Nvidia is trying to counter by offering special mining chips in order to free up graphics chip supplies for gamers during a global chip shortage.

While Nvidia was long known for its gaming graphic chips, its aggressive push into artificial intelligence chips that handle tasks such as speech and image recognition in data centres has helped it become the most valuable semiconductor maker by market capitalisation. It has eclipsed rivals Intel and AMD. Nvidia shares were up 3% at US$597.50 in extended trading after the results.

On a conference call with investors, chief financial officer Colette Kress said that a global chip crunch made it hard to keep the company’s flagship gaming chips introduced last spring in stock and that the chips would likely remain in tight supply through the fiscal first quarter.

Kress said analysts have estimated that cryptocurrency mining contributed between $100-million and $300-million to Nvidia’s sales in the financial fourth quarter. The company expects the new mining chips to generate about $50-million revenue in its fiscal first quarter, Kress added.

Crypto mining

To discourage miners from using gaming chips, Nvidia will start shipping software with its gaming chips that slows down their ability to mine some currencies and then separately release a mining-specific chip. Nvidia CEO Jensen Huang said that the mining chips do not need gaming features such as display outputs, which means that chips that might not be suitable for gaming can be used for mining instead.

“The way they use the chips, they don’t need a whole bunch of functionality,” Huang said of miners.

The company expects first-quarter revenue of $5.3-billion, plus or minus 2%, above analysts’ average estimate of $4.51-billion. Revenue in the quarter ended on 31 January rose to $5-billion from $3.11-billion a year earlier. Analysts on average were expecting $4.82-billion, according to IBES data from Refinitiv.

Revenue in the company’s gaming segment was $2.5-billion, above analyst estimates of $2.36-billion, according to data from FactSet. Data centre revenue was $1.9-billion, above estimates of $1.84-billion according to FactSet data.  — Reported by Chavi Mehta and Stephen Nellis, (c) 2021 Reuters

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