Nvidia Bear Now Bullish on Cryptocurrency Mining

  Chipmaker Nvidia Corp. (NVDA NVIDIA Corp  NVDA 159.47 +1.51%   ),  which has had a good run in the stock market this year, just added  another Wall Street bull to its corner thanks to the rise of  cryptocurrency and the need for high-end graphic cards to mine the  digital currency. Pacific Crest Securities, which downgraded Nvidia’s shares a couple  of months ago, reversed itself Tuesday, raising its rating to sector  weight from underweight all because of cryptocurrency such as Bitcoin.  "Meetings with desktop graphics card manufacturers indicated a sharp  reversal in sales trends expected for the seasonally weaker 2Q, with  surging demand from cryptocurrency miners in China and Eastern Europe,"  analyst Michael McConnell wrote in a research note to clients Tuesday  that was covered by CNBC.  "The sharp increase in demand from cryptocurrency miners has rapidly  depleted excess channel inventory carried into the quarter." The analyst also pulled his $99 price target on shares which closed  at $157.09. NVDA stock is up more than 55% since the start of the year  and, as CNBC pointed out, is about 45% higher since Pacific Crest  Securities downgrade it in early April. (See also: Why AMD and Nvidia Are Poised For Their Biggest Drops.) 

Mining With Computers

Pacific Crest isn’t the only Wall Street firm that is bullish on  Nvidia’s prospects. People mining for the coins use high-end graphic  cards, with Nvidia and Advanced Micro Devices Inc. (AMD Advanced Micro Devices Inc  AMD 13.98 +10.60%   ) seeing the most demand. The computer-created coins can either be held or sold for a profit. (See also: What is Bitcoin Mining?) Earlier this month, RBC Capital analyst Mitch Steves was prompted to  reiterate his outperform rating on shares of the chipmaker after running  a "thought test" to see how its graphic processor compared with AMD's.  Using the GTX 1070, a graphic processor Nvidia introduced last year, and  putting it up against AMD’s Radeon 580 semiconductor, the analyst set  out to see how the chips would perform while mining for Bitcoin and  Ethereum, two popular cryptocurrencies. Based on his experiment, Steves  found there isn’t much difference between the two while mining for  Ethereum, but while building a data center environment for Bitcoin,  where the cost of electricity becomes more important, the older Nvidia  chip performed better than the AMD processor over the course of a year. With the price of the two currencies skyrocketing in recent weeks, it  is not surprising analysts are getting more bullish. Pacific Crest  warned in the research note the euphoria could be short lived. "In terms  of demand sustainability from the cryptocurrency market, desktop  graphics card manufacturers are skeptical, referring to the one-quarter  demand surge in 2013, which was followed by an inventory correction,"  McConnell wrote. "Most desktop graphics card manufacturers surveyed  expect strong demand to last until late-July or August, but visibility  is extremely low given the volatility in cryptocurrency prices."