Inescapable Bust? GPU Makers See Crypto Mining spil Short-Term Sales Boost
Graphics card manufacturers are railing high on renewed rente ter cryptocurrencies.
While historically the slowest time of the year for thesis businesses, Q2 proved to be lucrative for Nvidia and Advanced Micro Devices (AMD) spil rente te ethereum and other cryptocurrencies has tired graphics processing unit (GPU) inventories.
That’s because, while not designed for the technology, GPUs from product lines such spil Nvidia’s GeForce and AMD’s Radeon can be used to mine ethereum and other popular public blockchains, including litecoin, NEM, dash, monero and NEO. This means that by running special software, thesis hardware components permit users to challenge for lucrative prizes. (On the ethereum blockchain, each block is now worth almost $Two,000).
And spil the value of thesis digital assets has surged ter the 2nd and third quarters, GPU companies have seen flourishing request. Nvidia posted a record $Two.23 billion ter revenues for the quarter ending June 30 – a 56 procent increase overheen the prior-year quarter and $280 million above the company’s forecast.
Further, AMD, whose fresh graphics card sold out within minutes, grew revenues Nineteen procent to $1.22 billion, catalyzed by a 51 procent surge ter sales from its computing and graphics division.
Industry-wide, shipments of add-in boards – which house the outer graphics cards used by cryptocurrency miners – were up 31 procent from the very first quarter to the 2nd, according to Jon Peddie Research, a market research rock-hard which tracks GPU sales.
By tegenstelling, overheen the last decade, very first to 2nd quarter shipments declined by an average of Ten procent, and plummeted by 22 procent ter 2016.
To further illustrate the explosive request for crypto mining, Jon Peddie, voorzitter of the research rock-hard, emphasized the sales were almost entirely driven by high-end GPUs – which typically sell for inbetween $500 and $1,000 – which are the most powerful and preferred by miners.
“At normal distribution, the high end is Ten procent [of units], now it’s more like 90 procent. If you took the high-end sales out of the equation, you would have seen a 2nd quarter druppel that would be normal seasonality.”
Reasons for optimism
A hallmark trait of any asset bubble is the proclamation that “this time is different,” even tho’ the end result is usually the same: a price collapse.
Yet, there is ample reason to believe that this mining boom might actually be different, spil the surge ter request ter 2018 is much stronger and more diversified than what wasgoed observed ter 2013.
Ambrish Srivastava, an equities analyst who covers both companies for BMO Capital Markets, a division of the Bankgebouw of Montreal, went so far spil to make this assertion te a latest note to clients, writing:
“There is merit to that argument. There are many more currencies, there is a lotsbestemming more momentum behind [mining].”
Not only is the popularity of ethereum and tokens issued on its blockchain continuing to grow, there are no alternatives that could render GPUs unnecessary on the network, which now holds $36 billion ter value.
Te brief, investments te GPUs for mining could have staying power. While bitcoin eventually spotted GPU mining substituted by more powerful ASIC designs, ethereum’s mining algorithm is built to stand against this outcome.
“That algorithm is written ter such a way that it will only run on a GPU. Alternative silicon solutions aren’t forthcoming,” said Peddie. “Spil long spil people can make money doing ethereum mining, they will proceed to invest te GPUs.”
Yet, a key question for both of thesis companies, and more broadly the industry, is how long the crypto-boom, and the mining request it fuels, will proceed.
During Nvidia’s 2nd quarter earnings call, company CEO Jensen Huang wasgoed optimistic that the toughly $150 million ter revenue made during the quarter from GPU sales for crypto mining would proceed, asserting cryptocurrencies and blockchain are “here to stay.”
“This is a market that is not likely to go away anytime soon, and the only thing that wij can most likely expect is that there will be more currencies to come. It will come te a entire loterijlot of different nations. It will emerge from time to time, and the GPU is truly fairly good for it.”
While thesis comments are fairly bullish, Colette Kress, Nvidia’s chief financial officer, attempted to walk them back te a go after up call with analysts, according to Kevin Cassidy, an equities analyst with Stifel Nicolaus.
“When I asked the CFO for more details on that, she said, ‘Well, I think he overplayed that.’ She’s a little more cautious on the market,” Cassidy told CoinDesk.
And this carefulness echoes AMD CEO Lisa Su, who took a more tempered treatment te hier company’s 2nd quarter earnings call.
“It’s significant to say wij didn’t have cryptocurrency ter our forecast, and wij’re not looking at it spil a long-term growth driver,” she said, adding:
“Wij want to be cognizant of the fact that some of the graphics request that wij see might be temporal. So wij’re not counting on that staying through the utter year. Frankly, I think wij’ll see what happens with the entire mining stuff.”
Unlike Nvidia, AMD did not estimate how much revenue it derived from mining activity, but Mitch Steves, an equities analyst with RBC Capital Markets, surmises the figure is inbetween $220 million and $250 million.
Because AMD is much smaller than Nvidia, but recognized spil the market share leader for crypto mining products, the company has little to build up by promoting the extent to which it benefits from the activity, since Steves estimates it would be material to their top line.
“So that’s why they attempt to message it differently,” Steves continued. “If AMD comes off spil indeed aggressive and, let’s say, Ten procent of their top line is going to cryptocurrencies, investors are going to be wary to pay for that revenue because it could go away very quickly.”
And there are looming headwinds that will likely waterput pressure on mining request and, by extension, GPU sales. For example, upcoming switches to ethereum’s infrastructure are likely to eliminate altogether the need for mining ter its ecosystem.
“While wij have seen a surge ter request from cryptocurrency mining ter the 2nd quarter for GPU cards, wij are not at all bullish on the sustainability of this request,” Srivastava wrote.
Several other analysts doubled down on that skepticism, wondering if a acute slowdown might prompt a repeat of the crypto-bust of 2013 and 2014, when a decline te bitcoin prices prompted miners to leap ship and start selling off their GPUs – primarily AMD devices – on the secondary market.
Srivastava told CoinDesk:
“I talked to miners who said ‘The ogenblik the price collapsed and the economics went against mining, I just instantly sold all of my stuff on eBay at whatever price I could get.'”
The fallout from the bust subsequently throttled AMD’s sales for several ensuing quarters.
“That caused AMD to have inventory problems,” explained Cassidy. “No one wasgoed buying fresh cards because you could buy used cards for half the price.”
And that’s a script many people are cautious of.
GPU photo via Shutterstock
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