Nvidia obtains a boosted price target. Bitcoin’s impact on gaming could end.

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Nvidia is a leading manufacturer of graphics processing units, or GPUs. Remus Rigo / Dreamstime.com

The impact of Bitcoin mining on Nvidia’s gaming business could slow down, prompting investment bank Piper Sandler to become more bullish on the stock.

Bank analysts on Monday raised their price target for Nvidia (ticker: NVDA) from $ 225 to $ 260. Nvidia stock was up about 1% in the US pre-market, after closing at $ 227.26 on Friday. Shares have climbed more than 73% in 2021. Analysts cited a “more constructive” view of Nvidia’s gaming business as the reason for their more optimistic outlook.

In a note, Piper Sandler’s Harsh Kumar and Matthew Farrell discussed how more graphics processing units (GPUs) could flow into the critical gaming market, which has been disrupted in the past by GPUs scavenged by crypto miners. -cash.

GPUs are computer chips with applications in gaming machines. They can also be used to power Bitcoin mining devices, which are power-hungry computers rewarded with cryptocurrency to solve complex math problems. Higher Bitcoin prices increase the incentives for cryptocurrency mining.

Kumar and Farrell’s research scraped eBay (EBAY) for data on the aftermarket selling price of GPUs as a premium over the Manufacturer’s Suggested Retail Price (MSRP).

They found that the relationship between Bitcoin prices and GPU premiums in the aftermarket decoupled, especially for chips from Nvidia. In the past, when Bitcoin prices soared, the value of GPUs sold on eBay also rose, indicating that chips were heading into cryptomining and commanding high premiums for players in the gaming market.

GPUs sell for between 1.5x and 2.5x the MSRP in secondary markets, analysts found, but that’s well below the 2x to 3.75x MSRP range that units were selling at when pricing. of Bitcoin were at similar levels in May.

Analysts found that a recent Bitcoin price hike did not impact the price dynamics of Nvidia GPUs in the secondary market. They said this could represent the weakening of the relationship between Bitcoin and GPU prices, which would leave more GPUs to sell for gaming purposes – where demand for units is high and supply is tight. , especially as the holiday season approaches.

“For Nvidia in particular, the impact of cryptocurrency on the gaming industry has been a drag for some investors,” Kumar and Farrell said. With limited GPU supply, more GPUs heading into the crypto industry than the gaming industry, as secondary market premiums indicate, could hurt Nvidia’s market share in games, which is a main activity.

“If decoupling occurs, we believe gaming GPUs will be able to meet real gaming demand, instead of potentially being allocated to cryptomining,” Piper Sandler’s team said.

While the price of Bitcoin and other cryptocurrencies has skyrocketed over the past year (Bitcoin has jumped over 380% in the past 12 months), many investors remain skeptical of the outlook. long term of cryptos. Cryptocurrencies have also proven to be extremely volatile, with intense day-to-day price fluctuations.

“If the decoupling were to persist, we believe it would be positive in the long term, as it eliminates unwanted noise for the core business,” added the analysts.

Nvidia stock hit a record intraday high above $ 231 on Friday, and analysts including Kumar and Farrell are bullish on the tech company’s earnings, which are expected to be released in November.

Write to Jack Denton at [email protected]

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