The widespread shortage of chips has not affected the latest quarterly results of Nvidia Corp, which is riding high on a massive demand in video gaming and cryptocurrency fuelled by the Pandemic.
The company posted a net income of $1.91 billion in the recent quarter, double of what it earned last year. Revenue rose 84% to $5.66 billion. Both profit and revenue exceeded expectations, according to analysts.
Nvidia’s order books are overflowing with companies looking to bolster their computing powers based on the unending demands for computers and other smart devices by people locked down at home due to the Pandemic.
The rising demand and other geo-political and economic factors have impacted the production of chips. Smart devices, automobiles and many other companies are facing an acute shortage of chips because of restrictive trading practices. Companies such as Apple Inc. and auto giant Ford Motor Co. are also feeling the pinch with production delays. Recently, President Biden called for an infusion of $50 billion to strengthen the U.S. semiconductor industry.
The California-based Nvidia is the U.S.’ biggest chip-making company by value and is known for its graphic cards, much in demand by gaming device manufacturers.
The high-performance graphic chips are used in other applications, including mining of cryptocurrencies and AI.
Nvidia’s gaming division more than doubled sales in the quarter. Its data center sales were up 79% from the year-earlier to more than $2 billion. The main drivers for the uptick in sales were graphics cards for laptops, and personal computers said the company financial chief Colette Kress.
Cryptocurrencies like Bitcoins, which have seen a volatile growth in the past year, also fuelled the demand for Nvidia’s tiny processors.
Kress emphasised that the world will continue to witness a chip shortage in the coming months, too, as the industry needs time to recover from the pandemic effect. The supply channels are still not running smoothly.
Chief Executive Jensen Huang said that despite the supply challenges, the key drivers of the business— high-performance graphics cards—will continue to witness the rising demand. In addition, with companies increasingly using AI-driven tech to run their business systems, the demand is expected to grow.
“The company’s key businesses would continue to grow as gamers snap up its high-performance graphics cards and datacenter customers increase their use of artificial intelligence. “Our gaming business and our datacenter business is strong and is strengthening,” he said in an interview. “We expect the second half to be bigger than the first half,” he said of the company’s sales outlook.
Nvidia’s latest graphic generation of graphics cards are so much in demand that a robust grey market dealing in them has emerged. To meet the shortage, Nvidia has set a cap on their usage in mining of cryptocurrency.
The software floated to curb its usage will hopefully force the miners to invest in the hardware targeted at them.
The volatile cryptocurrency market has had its effect on Nvidia too. It witnessed a massive revenue decline two years ago after cryptocurrency prices cratered, making mining unprofitable.
Recently, Nvidia acquired the British chip manufacturing company Arm Holdings for $40 billion.
The deal has raised alarm amongst companies that use the Arm chips in their devices.The companies have voiced concerns that once Nvidia takes over Arm, then all competing entities in the market, including cellphone, smart device makers, and anyone who uses the chip tech of Arm, will be placed at a disadvantage and will be at the mercy of Nvidia’s largess.
The deal is facing antitrust probes from the U.K., E.U., and the FTC of the U.S. over concerns shown by other chip manufacturers about monopoly issues. Arm is owned by SoftBank.
Nvidia’s stock has witnessed an 80% rise over the past year. The company expects revenue of around $6.3 billion for the current quarter, much above Wall Street’s expectations. Its board also declared a 4-for-1 stock split, which will be incumbent on the board’s approval.