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During the initial crypto boom in 2017, large chip makers Nvidia and AMD were massively profiting from their hardware used to mine cryptocurrency. During the crypto surge in 2017, many miners understood they needed to utilize the most effective hardware if they wanted to compete with other miners in the network. During this time both Nvidia and AMD were providing this support through their graphic cards. The sky was the limit as many analysts believed there would be additional opportunities in the altcoin markets for Nvidia and AMD to continue profiting. During this era, Nvidia was experiencing a stronger crypto business than AMD. If we take a look at the chart below, we can see that NVDA stock price was highly correlated to Bitcoin price. As the price of Bitcoin was rising, investors and analysts were predicting hardware demand / sales were increasing for NVDA. Stock price continues following Bitcoin until the new crypto highs in 2017. As the massive sell-offs began in 2018, NVDA stock price witnessed the same activity as many investors started understanding their crypto business might be in jeopardy.
As the Bitcoin and Ethereum markets continued to struggle through 2018, Nvidia released a third-quarter earnings report in November. Crypto mining sales were experiencing a “hangover” due to market conditions. In the filing above, NVDA gave the impression that operations would get better when they mentioned the quote “our near term results reflect excess channel inventory post the crypto-currency boom, which will be corrected.”
Fast forward to most August 2019, many investors were bullish on NVDA due to crypto markets being successful in 2019. Bitcoin has experienced 170% gain YTD and mining difficulty continues to go up. In order for miners to keep up with mining difficulty, they need to insure they have the most effective hardware. With this being said, many projected increased sales / demand for NVDA graphic chips.
NVIDIA and AMD Both Show Lower Demand
Despite recovery in Bitcoin prices this year, miners seem to be going elsewhere for their hardware. In the most recent filing by NVDA, the company mentioned that “Our PC OEM revenue decreased by 4% primarily driven by the absence of cryptocurrency mining processor sales.” This was a strong statement by NVDA, as they made it sound like little crypto demand was rolling in which is something many investors / analysts were not expecting to hear from the chipmaker. If we were to look at the AMD most recent quarterly filing, we will also see that the company is experiencing lower computer / graphic sales compared to 2018 metrics.
Bitmain Taking Some Market Share?
Unlike NVIDIA and AMD which offer public financial reports, we don’t have the same leverage with Bitmain. The company did have plans to pursue an IPO ( initial public offering ), but that never came to fruition as their application ended up expiring. What we do know is Bitmain has been challenging NVIDIA and AMD since 2018. Last year it was reported that Bitmain planned on launching their new “specialized mining chips.” This development from Bitmain would allow them to roll out their own personalized ASIC chip that could be utilized in mining Ethereum. Bitmain was first to market with this product and also controls significant market share of BTC ASIC hardware. Due to Bitmain not having traditional quarterly reports like publicly traded entities, its difficult to assess how their business is doing. There may be a chance Bitmain is doing significant business, as recent NVIDIA and AMD reports show lower strength in the crypto space. Visionary Financial reached out to Ebang and Innosilicon to inquire on mining sales, but the entities have not responded to us yet.
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