Market Analysis: NVIDIA spike shows there’s more than just mining. Will it be short-lived?

FXOpen

North American multinational computer hardware giant, NVIDIA, has demonstrated over the past few years that there are areas of the tech industry in which hardware is far from obsolete.

It may well be the case that most traditional computer hardware, apart from smartphones, tablets and laptops, has now been replaced by online storage, cloud hosting and streaming services – gone are the days when huge, grey servers whirred away in offices – but there are some tasks that require specific hardware, and some of those tasks are very big business.

NVIDIA therefore is a company that has not only survived the move toward the mobile-first, everything-online world that we now live in, and that is because it produces graphics cards as a core product, and graphics cards, particularly advanced ones such as those produced by NVIDIA, are used in large numbers by cryptocurrency miners.

Huge mining rigs the size of factories have existed for the past decade, using industrial scale amounts of graphics cards from which to conduct the digital currency mining.

This has been a factor that has kept NVIDIA not only seriously profitable, but also among the top traded stocks on New York’s premier tech-friendly NASDAQ stock exchange.

The days of other hardware firms dominating the big cap world are long gone, but NVIDIA is still there at the forefront.

However, it appears that it is not just digital currency mining that keeps NVIDIA stock buoyant. This week begins with NVIDIA stock at a one-week high point, after a sudden surge in value on Friday. During the New York trading session, NVIDIA stock rose from $409.38 per share, which was its closing value on Thursday June 29, to $424.62 by 14.00 CET on Friday June 30, representing a 14.8-point increase in value.

NVIDIA may well be synonymous with commercial digital asset miners, however there is another important area which should be kept in mind, that being the original intended purpose for NVIDIA’s products – use as an actual graphics card within specialist computers, especially those built for gaming.

Many computer games require advanced graphics capabilities from the computers upon which they are played, and whilst the day of the desktop computer may well be long gone for most people, gaming enthusiasts are still buying or custom-building desktop computers from components specifically designed to enhance the speed at which they operate, and the quality of the graphics which many games often require.

NVIDIA launched a critical new product during the latter part of last week in the form of the RTX 4060. This is the most affordable graphics card which NVIDIA produces, and it arrived on the American market priced at $299 on Thursday last week.

An entry-level product from this esteemed manufacturer may well give discerning gamers on a budget access to a quality product, and this could well be the cause of the increase in value of NVIDIA shares during Friday last week.

There are some aspects to bear in mind, however, which could stunt this euphoria. One is that the lower budget graphics card market is highly competitive. Those seeking to buy a higher up the range NVIDIA card would seek to buy that specific model to suit gaming needs, but people with less requirement for a highly expensive product find themselves with a choice from a plethora of other manufacturers and are less likely to require a particular NVIDIA model over cheaper competitors.

Another is that demand for graphics cards for generic computing purposes has been declining.

There has been a switch recently toward graphics cards being purchased to be able to train AI (artificial intelligence) robots, whilst the demand for gaming graphics cards has been dwindling.

When considering this, it may well be that the new product launch into an affordable product marketplace drove the price up, but the wider factors mentioned here, plus the steady demand for NVIDIA’s higher end products for digital asset mining and gaming, which is not part of the new product’s influence on the company’s share price.

Either way, this could either be a welcome entry into the mainstream for NVIDIA, or a bit of short lived euphoria around the release of a very generic product.

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