Nvidia is getting a huge boost from a red-hot cryptocurrency

Graphic processing units are used to power games, but that’s not what is driving Nvidia’s stock skyward right now.

Cryptocurrency mining is one of the biggest drivers to the GPU maker’s shares in recent weeks. In just 11 days, about $US100 million worth of GPUs were added to the Ethereum network, according to a new note from RBC Capital Markets. Nvidia’s stock has climbed about 5% over that time.

“While the company is shifting its business toward Automotive and Gaming specific revenue, we note that the combined GPU business represents the majority of NVIDIA’s revenue,” RBC said.

Etherum is a red-hot cryptocurrency. Its value has ballooned 4,056% this year. The value of one Ether was worth $US8.07 on January 1, 2017, and is now worth around $US336.41, according to ethereumprice.org. The currency is worth $US31.14 billion in total, which places it somewhere between the market cap of 21st Century Fox and Dish Network, for reference.

Because the cryptocurrency has risen so quickly, miners are eager to get in on the action. To obtain Ether, you can either pay for it as with any other currency exchange or set up a computer to help verify payments and maintain the network. Those who help maintain the networks are known as miners, and those miners have spent millions of dollars on GPUs in the past few days to help speed up their computers and get more Ether.

To figure out the number of GPUs that were added to the cryptocurrency network, RBC looked at the speed at which payments of ether are being verified by miners, and divided the recent increase in speed by the average speed of a single GPU.

RBC measured an approximately 10 million megahash per second increase in speed over 11 days, and divided that by an average GPU speed of 30 megahashes per second to get an estimated 333,333 new GPUs. RBC estimated each of these new GPUs would sell for about $US275, meaning $US91.7 million has been spent on GPUs recently.

Nvidia was a more attractive GPU manufacturer to many miners because the price of its GPUs on the secondhand market was lower than those of competitor AMD. However, that has changed with the recent increase in demand, according to RBC.

Other cryptocurrencies, like Zcash and Monero, have also seen increases in mining speed on their networks, which RBC thinks is a net increase in GPUs on the network, rather than miners switching between networks.

RBC has a price target of $US175 for Nvidia which is 10.4% higher than the current price. “Importantly, we think FY18 results (within Data Center and Gaming specifically) will be above expectations which could cause our forward numbers to increase in a material fashion,” the firm wrote.

Nvidia’s share price has surged 55.74% this year.

Click here to watch Nvidia’s stock price in real time.

Get the latest Bitcoin price here.

NOW WATCH: An economist explains what could happen if Trump pulls the US out of NAFTA

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.