CRYPTOCURRENCY HAS BEEN GREAT FOR GPU MAKERS, IS THIS TREND COMING TO AN END?

Over the past year, there has been a buzz about the cryptocurrency boom and how it's making enormous profits for GPU makers. The NVidia announcement of its financial results showed that the news isn’t just a buzz but a fact. GPU sales to cryptocurrency miners were estimated to be worth 776 million dollars. NVidia’s first quarter this year had revenues of $3.2 billion. The company reported up to 10 percent increase from the last quarter and up to 66 percent over the previous year. Profits increase were very impressive, an 11 percent increase from the last quarter and 145 percent over the past year.

NVidia’s greatest rival AMD has announced record revenues and profits. The company reported a revenue increase of up to 23 percent since the previous quarter and 40 percent over the past year. AMD had earnings of $81 million profit in the first quarter of 2018, this compared to a $19 million loss over the last quarter and a $33 million loss in the first fiscal quarter of 2017.

Graphics cards makers have long relied on gamers as their market. This is changing however with the cryptocurrency boom that is said just to be beginning. Graphics cards have a new market namely cryptocurrency miners. The increased demand has caused the price of some high-end graphics cards to more than double. This price increase has brought on wrath from gamers. They have been advised to use their graphics cards for mining whenever they are no gaming so as to cover the graphic card costs.

FURTHER READING

NVidia has stated that its loyalty lies with gamers, a market they have always had and isn’t going anywhere. The company has devised ways to try and protect gamers by providing crypto-specific GPUs.

"Cryptocurrency demand was again stronger than expected, but we were able to fulfill most of it with crypto-specific GPUs, which are included in our OEM business at $289 million," said Nvidia’s CFO Colette Kress when on an earnings call. "As a result, we could protect the vast majority of our limited GPU supply for use by gamers."

Analysts have wondered whether Nvidia siding with gamers is the reason AMD is making more profits and has gained 8% market value from the cryptocurrency boom. Most have agreed however that its more because of the cheaper price of AMD graphic cards compared to Nvidia.

This is a very sensitive topic for major graphics-card makers because their most important market, in the long run, might be gamers, not miners. Gamers hate the idea of graphics-card makers making big profits from inflated prices that are a result of mining demand.

A $289 million figure which is almost 10 percent of Nvidia's revenue has been reported as the impact of cryptocurrency on the company’s revenue. However, this seems to be an understatement. It is quite impossible to determine what a graphics card is going to be used for if an individual consumer buys a graphics card at a retail store. Even the rest of the cards that were sold exclusively to gamers, the cryptocurrency-caused shortages helped to increase the average price and hence the profitability of all graphics cards NVidia sold.

In the year 2018 cryptocurrency values have been falling. There has been fear that graphics card makers will be adversely affected. Analysts have predicted a fall in graphics card prices and miners selling their graphics cards thus further price fall. AMD’s projections show an expected fall in revenue from cryptocurrency miners. Some analysts believe that the cryptocurrency boom is over. They believe prices will keep falling. They might be right because Bitcoin lost 62% of its price value this year. This might be great news for gamers but bad news for Graphic card manufacturers.

In an earnings call, Lisa Su , AMD president said she wasn't too worried about this. "There are multiple currencies being used," she said. "People who are mining do go from one currency to another depending on what's happening. "She also said that many customers buy graphics cards for both gaming and mining. They're most likely going to hold onto their graphics cards for gaming purposes even if mining becomes unprofitable.

The analysis has faced criticism. Others argue that though It's true that there is an abundance of cryptocurrencies, but there are only a very few of them that have economic significance. Ethereum's ether seems to be by far the most significant GPU-mineable one.  The prices of cryptocurrencies are strongly correlated. If ether's value crashes, other cryptocurrency prices are expected to follow suit. 

While some people would buy graphics cards for multiple applications, there are also a lot of people who have bought a lot of cards and put them into mining rigs. Those people might hold onto one or two cards for gaming, but if cryptocurrency prices keep falling, at some point, many of those cards are going to wind up in the used GPU market. That could make it hard for AMD and Nvidia to sell new graphics cards.