Graphics card manufacturers NVIDIA and AMD have been raking in huge profits — thanks, in part, to the influx of cryptocurrency mining over the past year. Recently, however, the decreasing prices of cryptocurrencies and a lower demand for GPU mining could bring the engine to a stall. Are the manufacturing giants prepared to adapt?
Time In The Spotlight
It has certainly been a profitable year for graphics card manufacturers NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD). Both companies have seen massive percentage gains this past year — with NVIDIA currently up almost 160 percent, while AMD is up 73 percent since May of 2017.
The majority of these huge profit increases have come from the sales of high-end graphics processing units (GPUs). AMD and NVIDIA didn’t have enough supply to meet the sudden and sharp increase in demand for the fastest GPUs on the market. This demand came mostly from everyday people looking to cash in on the cryptocurrency mining craze — especially in November and December of 2017 when the price of Bitcoin was nearly $20,000.
The demand and profits rolled over into the first quarter of 2018, even as the price of major cryptocurrencies began to decrease.
Harsh Chauhan noted:
AMD has said that it got 10% of its total revenue in the first quarter from cryptocurrency mining. Given its total revenue of $5.3 billion last year, that would indicate it cornered roughly two-thirds of estimated cryptocurrency-related GPU sales. NVIDIA also said that cryptocurrency miners drove nearly 10% of its GPU sales last quarter.
New Miners — ‘Who This?’
The cryptocurrency mining landscape has drastically changed over the course of the past few years. Large mining companies such as Bitmain have been the biggest competition to NVIDIA and AMD in the mining sector. Bitmain is regularly releasing updated versions of their Application-Specific Integrated Circuit (ASIC) mining rigs.
ASIC miners are made for the sole purpose of mining cryptocurrency. They are cheaper and more efficient at mining and are now widely available to the public.
NVIDIA and AMD’s GPU profits have started to see a decline with these newer and more powerful ASIC alternatives on the market. GPU prices have also begun to come back down as supply is catching up with demand.
NVIDIA and AMD have both felt the backlash from the PC gaming community — who have been less than happy about the soaring prices and scarce availability of high-end hardware that was designed for gaming. NVIDIA has made steps to appease its core user base by launching the GeForce GTX 1050 3GB graphics card — a budget graphics card that can still handle high-end graphics processing but at a much lower price than its GTX 1060, 1070, or 1080 series cards.
It seems as though AMD and NVIDIA are at a tipping point. They are losing the battle with large mining companies to develop the most cost-effective and efficient mining hardware. For the remainder of 2018, NVIDIA and AMD will likely need to return to their central focuses of providing gaming hardware, data management, and artificial intelligence solutions — in order to avoid falling off of the deep end.
What do you think is in store for NVIDIA and AMD for the remainder of 2018? Do you think they should focus more or less on making products for cryptocurrency mining? Let us know your thoughts in the comments below!
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