NVIDIA (NASDAQ: NVDA) investors have been laughing at the bank for the past two years, with stock prices for the video card specialist rising more than 240% due to the huge growth in their video game and data center businesses.
This year is unlikely to be different, given NVIDIA’s latest results and guidance. The company seemed ready to deliver figures that were burst in the fourth quarter of fiscal 2021, and so it was. Revenue and earnings skyrocketed and exceeded consensus estimates by huge margins. Furthermore, NVIDIA delivered excellent guidance for the current quarter, which predicts revenue growth of 72% over the previous year to $ 5.3 billion, crushing Wall Street’s estimate of just $ 4 , 51 billion.
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The company ended fiscal year 2021 with revenue of $ 16.7 billion, an increase of 53% over the previous year. Its fourth-quarter tax revenue increased 61% year-over-year, to $ 5 billion. So, NVIDIA is starting the new fiscal year with a bang, and there are some solid growth drivers that can help it sustain its impressive run.
NVIDIA’s biggest catalyst is growing
The video game business performed stellarly for NVIDIA in the last quarter. Gaming revenue soared 67% year on year to $ 2.5 billion, accounting for half of the company’s sales. NVIDIA said it is witnessing incredible demand for its latest consumer graphics cards in the RTX 30 series based on the Ampere architecture. In the last earnings conference call, CFO Colette Kress said: “It was difficult to keep the entire 30 Series line in stock and we left the fourth quarter with channel stocks even lower than when we started. will remain low throughout the first quarter. “
Clearly, NVIDIA expects the huge demand for its graphics processing units (GPUs) for games to continue. This is not surprising, as demand for gaming hardware is holding up well after last year’s pandemic escalated. What’s more, NVIDIA’s RTX 30 series cards have given their huge installed base of former GPU users a solid reason to upgrade.
Ampere cards are almost twice as efficient compared to previous generation Turing cards, providing a huge increase in frame rates and consuming much less energy. Most importantly, they were evaluated aggressively. This caused a dispute among customers for the latest NVIDIA cards, leading to a restricted supply.
In addition, cryptocurrency-related demand is also underpinning NVIDIA’s gaming business. Citing analysts’ estimates, the company says cryptocurrency miners bought $ 100 million to $ 300 million graphics cards in the last quarter.
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Although this is not a large number compared to the company’s gaming revenue, it is important to note that demand related to cryptocurrency has historically contributed to the scarcity of GPUs and higher prices. In addition, it should be noted that NVIDIA generated about $ 2 billion in sales revenue related to cryptocurrencies a few years ago, so it could gain a lot in this market again due to the growing interest in digital currencies.
NVIDIA is looking to make the most of cryptocurrency-related opportunities. It recently launched dedicated mining encryption processors (CMPs) that it plans to sell to industrial miners. The company expects revenue of US $ 50 million in the CMP this quarter. While this does not significantly change NVIDIA’s pace, it can help the company free up supplies to meet the demands of real players and boost sales.
Mordor Intelligence estimates that the demand for gaming GPUs may increase at an annual rate of 14% by 2026. This is great news for NVIDIA, as it dominates the discrete gaming GPU market with an 80% share, according to Jon Peddie Research, and could capture more of the rival’s share Advanced micro devices improving the supply chain.
The data center business is crushing everything
Three months ago, there was concern about a slowdown in sales of the NVIDIA data center. The company put these concerns aside in the last quarter, when data center revenue almost doubled year after year, to $ 1.9 billion, producing 38% of its total revenue.
This huge growth was driven by an increase in sales of NVIDIA’s A100 data center GPU. The A100 platform has been a hit with leading cloud computing companies and NVIDIA says it is still in the early stages of adoption. Not surprisingly, the chip maker anticipates that this product will drive “continued growth this year”.
CEO Jensen Huang also added that the company’s new BlueField-2 data processing unit (DPU) may start to gain momentum in the second half of the year, driven by customer adoption and engagement trends that the company has witnessed so far. Huang believes that “each data center node will someday be equipped with a DPU”. As such, don’t be surprised to see this product grow quickly and eventually turn into a huge revenue opportunity for NVIDIA in a few years.
Analysts expect NVIDIA to show growth of just 20% in the new fiscal year, but the company could easily surpass that estimate given the way the year started. That is why investors who have not yet joined the NVIDIA movement can still consider buying these high-growth stocks, as it looks set to continue its wave of success.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.