Nvidia's boost from cryptocurrencies is slowing down (NVDA)

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Nvidia is among the companies seeing a boost from the cryptocurrency craze, but, that boost has been slowing down recently.

In its second quarter earnings report, Nvidia said it saw a $150 million boost from miners buying its chips to help mine cryptocurrencies, like Ethereum. During that quarter, the speed of the network increased by about 55 terahashes per second, according to Mitch Steves, an analyst at RBC Capital Markets.

Steves says the network is not growing as fast this quarter, which would mean fewer miners are buying cards and the boost from cryptocurrency mining will not be as large for the company in the current quarter.

So far, in the third quarter, the network has only increased about 15 terahashes per second, which implies a boost of about $40 to $45 million for Nvidia. The network speed increases as more cards from Nvidia and other companies are added to the network. Miners have been scrambling to grab as many cards as possible in order to speed up the network, and win a bigger share of the reward given for payment verifications. The rapid demand means Nvidia’s cards have been sold out in a lot of retailers recently.

A shift in the way the Ethereum network verifies payments could come as early as this year, according to Steves. That shift would move payment verification away from the power-hungry "proof of work" method to a "proof of stake" system. The new system, if implemented, would dramatically lessen the need for powerful chips from Nvidia, and by extension, lessen the boost the company has seen from cryptocurrencies.

Nvidia is paying attention to cryptocurrencies and sees it as an important part of its business, but its real bets are being placed elsewhere. The company just released a new chip architecture called "Volta" which has been popular in datacenter and machine learning applications. Volta production is still ramping up, and the chips are new to the market leaving lots of room for that segment to grow, Steves said.

The company also has partnered with carmakers Toyota and Volvo to help the companies' autonomous driving efforts. Steves believes this is another part of the business that will continue to grow in the future.

"Crypto isn't dead yet," Steves wrote. Ethereum, bitcoin and bitcoin cash have all exploded in value this year, but the hype for the currencies might eventually leave Nvidia behind.

Steves rates Nvidia a buy with a price target of $175.

Nvidia is up 62.99% this year, and is trading at about $166.11.