Cryptocurrency Boom, A Problem For Gamers, Is A Bonanza For GPU Makers

from ars technica

The cryptocurrency boom has created a persistent shortage of high-end graphics cards. That has been a headache for gamers, who have to pay inflated prices for GPUs—if they can find them at all. But it has been a financial windfall to leading graphics card makers Nvidia and AMD.

On Thursday, Nvidia reported soaring profits for the fourth quarter of 2017—a period when rapidly rising prices for Ethereum and other cryptocurrencies was driving a boom in amateur cryptocurrency mining with graphics cards.

“Strong demand in the cryptocurrency market exceeded our expectations,” Nvidia chief financial officer Colette Kress said in a call with analysts on Thursday.

Nvidia enjoyed revenue of $2.9 billion in the fourth quarter, which ended on January 28. That’s a 10 percent increase over Nvidia’s revenue in the third quarter. Nvidia’s net income rose 33 percent to a record $1.1 billion.

Nvidia’s products are popular in a wide range of markets, from driverless cars to data centers. So it would be a mistake to attribute all of these gains to the cryptocurrency boom. But in the Thursday call, Kress mentioned cryptocurrency miners as a significant source of demand and said that mining-related revenue has been on the rise.

In the same conference call, Nvidia CEO Jensen Huang acknowledged that gamers were suffering from GPU shortages. “We typically have between six to eight weeks of inventory in the channel,” Huang said. “Globally right now the channel is relatively lean.”

This, of course, is an epic understatement. As we reported last month, electronics retailers around the world had bare shelves where there should have been high-end graphics cards for sale. Shortages became so severe that used GPUs were being resold for hundreds of dollars above their suggested retail price.

“We’re working really hard to get GPUs out into the marketplace for the gamers,” Huang said.

More here.

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6 Comments

  1. Many people have probably heard of bitcoin and possibly even other cryptocurrencies, especially since it’s been in news media several times recently over its volatility and whether it should be regulated. Other cryptocurrencies on the rise include Litecoin, Ethereum, Zcash, Dash, and Ripple. The system by which cryptocurrencies work can be confusing to understand and it took me a while to learn what it really is and how it works, having known nothing about it nor having heard of it until it was mentioned on the news. A central idea of digital currencies is to avoid a middle or central authority such as a bank, credit card company or the government. Take Bitcoin for example, that works by each user having a bitcoin wallet installed on their phone or computer and a unique address generated so people can send you bitcoins. The address can only be used once, however, you can generate as many more as you need. A transaction is made by being broadcast to the entire bitcoin network with a private key, also called a seed, which is a mathematical signature utilized to prove that the transaction is authentic and came from the owner of the wallet, as well as to prevent the transaction from being altered by anyone once it’s issued. The members of the network maintain a continuous ledger of transactions called the block chain which essentially confirms the broadcast transactions through a process called mining. In confirming the pending transactions, mining involves processing strict mathematical cryptographic calculations that verify authenticity and provide security so no one can go back and alter previous blocks which would invalidate any subsequent blocks. This process helps to make the network more secure and to alleviate, if not eliminate, the problem of double spending. A miner was once able to mine bitcoin using the CPU on his computer, but as bitcoin grew, mining became more competitive and requires tons of special and powerful hardware, which is where the GPUs come in.

    Nvidia products are used primarily in gaming applications, digital rendering and visualization applications, and data centers but recently has worked in developing products for driverless cars, and Artificial Intelligence and Deep Learning. Nvidia reported $2.91 billion in revenue for their Q4, up 34 percent from one year ago and up 10 percent from the previous quarter of $2.64 billion. Their full-year revenue came in at $9.71 billion, an increase of 41 percent in the last year. Every market Nvidia is involved in has seen growth, so it’s not just cryptocurrency mining that has contributed to the growth, however, during the earnings call on January 28th, Nvidia CFO Colette Kress stated that cryptocurrency miners are a significant source of demand. On the same call, Nvidia CEO Jensen Huang admitted that gamers were suffering from GPU shortages and that the global inventory has been “lean.” Nvidia competitor AMD (Advanced Micro Devices) has also seen big revenue. Despite the increase in demand, both these GPU manufacturers, Nvidia and AMD, have been reluctant to invest in increasing their manufacturing capacity, fearing becoming too dependent on cryptocurrency miners. If they spend money on increasing production, the volatility of the cryptocurrencies may cause it to crash leading to all of those former miners to sell off their still powerful but cheaper GPUs and flood the market-a loss for the companies who make them. Nvidia is taking steps to protect one of their largest and most loyal consumers, the gamers, from crypto-miners from buying up all the supply in issuing a statement to retailers asking them to limit the sale of GPUs of two per order. Even if cryptocurrencies crash, and demand decreases from them, Nvidia still has their base in gaming. As long as cryptocurrency mining continues growing, we may not see a real end to the shortage for a while.

  2. Cryptocurrency is something to be weary about since it really is that volatile and prices are constantly changing as each day goes by. Cryptocurrencies such as Litecoin (LTC), Ethereum (ETH), or Zcash (ZEC) all have constant changing prices and they have all recently have been on the rise and that’s why everyone is jumping on the bandwagon. Although, the only reason these cryptocurrencies have any value to people is that it’s untrackable and widely used on the black market for transactions. They hold a certain popularity which is how it gets its value, especially cryptocurrencies like Bitcoin which is the most widely known. This currency is currently unregulated by any government within the world. Although some places are beginning to ban the trading of it like China has taken the action of doing. As the popularity rises the more the price rises until it eventually hits a bubble which will stabilize the price more and we might see declines within the market. In the meantime, cryptocurrencies are a hot commodity and the GPU market has seen a large boom.

    Nvidia and AMD are taking the right kind of actions though to combat the recent boom. They aren’t going to manufacture a GPU right away to satisfy the needs for the crypto miners since it might just all come crashing down on them. A big mistake for them would be to spend a bunch of assets on making a GPU that would just be forgotten because the cryptocurrency market crumbled. These companies don’t want to become reliant on a market with such hazard. All of this is still too new of a market to explore and take advantage of, but it’s more beneficial for miners to take advantage of it. The article did say that miners would just be able to sell their old GPUs online after they are done, if the market did become not profitable. It also isn’t that quick for companies to develop a new GPU for such a new market which only really emerged within the last 2 years. They have to go through years of trial and error to make such a GPU and it’s not as quick as we think it would take. Also, if they already had the information to make these faster GPUs, they most likely would have already taken the steps to make them that must faster. It’s new territory, and it all happened too quickly for companies to properly react. I agree with Ryan Mack on his statement, “Even if cryptocurrencies crash, and demand decreases from them, Nvidia still has their base in gaming.” This is true because it’s their core demographic and they wouldn’t want to stray away from this which has led them to such popularity over the years. These companies can’t forget where they came from and how they got here. So, they wouldn’t want to make such hasty decisions.

    It isn’t just the gamers that are seeing a negative effect from the recent GPU price increases. Astronomers are also seeing a big hit from these price increases. GPUs may be used for gaming to process the graphics data but they are also used just for the sole function of processing large amounts of data that astronomers would use. An astronomer from UC Berkeley who works with radio telescopes has seen the same negative effect. These telescopes have hundreds of antennas that pick up massive amounts of data which needs to be processed. What would normally cost him a lot less is costing him an upwards of $32,000 more. So, it isn’t just the gamers that are hurting from this because a bunch of other professions are hurting too.

  3. The only group of people benefitting from the cryptocurrency boom are, the companies that produce, the graphics processing unit. The gpu is used for various tasks from online gaming to searching for cryptocurrency. Cryptocurrency is a digital currency that has to be encrypted to use as a form of medium exchange. The cryptocurrency was first a digital currency for the people who use, the black market on the internet. The currency allows any person to make purchases online, as anonymous without the possibility of tracing it back to the black marketer. Over the past few years, the cryptocurrency started to gain commercial attention and is now a mainstream form of online currency. In order to obtain any form of cryptocurrency, a person must search for it online by the process known as mining. Investopedia states that, the mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle.

    The mining process is a popular way to obtain any cryptocurrency left in the market. Even though, the volatility of that type of currency is extremely volatile, it does not stop people from mining digital encrypted currency. The high demand for bit coins, light coins, and other forms of cryptocurrency has generated, an exponential amount of sales for graphic card makers. Adding the consumers who are mining for currency, this created a shortage of product to all the consumers.

    The unexpected high demand for the graphics processing units due to the mining fad had created, the shortage of supplies. This situation is frustrating to the gamer because, the consumers who are interested in mining for cryptocurrency are entering the market creating a higher demand for graphics card than ever before. I discern that the companies Nvidia and AMD are using a supply shortage tactic to increase prices on the consumer who mine because, they are temporary consumers. The gaming customers will have no choice but to pay inflated price. As the companies has stated on record, that the shortage is only temporary and the market will adjust after the fad passes. So, when will the fad pass? How long do the gaming consumer have to suffer the market inflation?

    In conclusion, I feel that the shortage of product is a marketing strategy to on the niche market. These companies have profited millions plus off this cryptocurrency ordeal so, how come they will not produce more product? The answer to that is simple, it is to make the most profit possible. In the business world the decisions made are nothing personal just business. These companies allegedly claimed that, they did not know the demand was that high. I personally do not believe that was the case because, they are leaders in their industry and most likely have done the market research. The shortage only hurts the customers who have been loyal to the company which are the gamers. They have to endure the temporary shortage that has plagued their market. In my opinion, the loyal consumer should not be taken for granted because, they have pledged their loyalty with company.

  4. Being a gamer it has been interesting seeing high end graphics cards boom in the last month. And while there is currently a shortage of NVidia and AMD cards at nearly every store, the drought I predict will only be temporary. The price and quantity of the graphics cards are directly tied to the value of cryptocurrency. So when the price of bitcoin or any other notable currency finally drops, so too will the demand for the cards. I look forward to this because it will urge many coin miners to then sell their brand new high end cards. Being that the cards will be both secondhand and in surplus, I am patiently waiting for the right time as a gamer to upgrade my personal computer. Moreso, if cryptocurrency is able to remain a contender in the market, it would lead to vast improvements in graphics card development. Something I very much look forward to. With any luck, the widespread use of powerful graphics cars will increase the capabilities of gaming computers going forward.
    What I am still trying to wrap my head around is why the graphics card companies chose not to produce more graphics cards during the time period in which cryptocurrency was soaring. From a business standpoint, the demand for cards was far higher than average, and I feel as though this was a missed opportunity for them. I suppose it was a safe move as there was no telling how long the trend of bitcoin will last. Though if I were in the shoes of the CEO, I would have upped the price of the GPUs in order to keep up with the rising demand, while at the same time keeping some inventory of the shelves.

  5. Since last year Thanksgiving, the graphics cards price had been raised, for example, the low-end Graphic card GTX1060 3GB from Nvidia was on sale for $170 during Thanksgiving, and the current price is around 300 dollars. A lot of people saw the cryptocurrency market keep rising and find the opportunity to make money with their PC. At the beginning of the GPU shortages, people are looking for the high-end graphics cards like GTX1080, once the high-end one is out of stock. People start using the low- end graphic card, which cause the entire GPU market went on shortage. In the meantime, the used graphics card market also went up because of the shortage. However, those used graphics card for mining is not worth the money, because the GPU is always used at 100 percent and the product lifetime will reduce significantly. Nvidia announces they will introduce the next generation of the graphics card in spring 2018 and they will also make graphics cards focus on mining. The demand for graphics cards increases both AMD and Nvidia fourth-quarter revenue. Nvidia demands the manufacturer to increase production to meet the request of the graphics cards. However, the cyber currency market had started to drop in 2018, according to the Cryptocurrency Market Capitalizations, in January the unit price for Ethereum had drop from $1200 to $500. Once the cryptocurrency market crumbles, people will stop buying graphics cards.
    In respond to Charles comment, Nvidia is actively trying to separate gamer and miner, which we will see when the next to generation graphic card come out. The reason for the current generation graphics card so popular is the level of performance went up twice compared to the last generation, this amount of level of performance increase is the largest compared to all previous generation change. A lot of the gamer see the need and value for the upgrade to the current generation graphics card. However, the price for the current generation graphics card had been drive by the miner and caused a lot of gamer from playing the newest video game. I do believe the market will go back to normal, once the new generation graphics card come out in spring.

    https://coinmarketcap.com/currencies/ethereum/#charts

  6. Cryptocurrencies such as Bitcoin, Litecoin, and Ethreum, are becoming increasingly popular each and every day and profits are continuing to rise with it. Graphics cards are used in what is called mining or complicated algorithms used to obtain cryptocurrency. Graphics card makers including AMD and Nvidia are tracking more business now more than ever and Nvidia for example earned a 10 percent increase in revenue in their last quarter. With such high demand there has resultantly been a persistent shortage in GPUs and thus gamers now must pay inflated prices for any GPU that can be found, even those of which that have been used.

    With these unexpected shortages creators claim to be working hard to get GPUs into the marketplace consistently. We must bear in mind however how much revenue is being made based on the current shortage. The article states that typically inventory in the channel is between six to eight weeks but this has disappeared. This market must reevaluate the increasing demand of their products and supply enough to meet the unknown demand. If these mentioned companies are unable to keep up with the supply which is demanded new companies will enter the market to alleviate the problem. I mentioned that demand is unknown due to the fact that more individuals are joining the culture of cryptocurrency each day. My maintaining reasonable prices, even more individuals will want to join this “movement”. Cryptocurrency, graphics cards, and GPUs are all relatively new concepts and we as a society must wait and see how these ideas and products continue to evolve.

    Gamers are not the only ones seeing the negative effects of the rising prices of GPUs. GPUs are used for the purpose of processing large amounts of data and other users include astronomers who use these GPUs to process the infinite amounts of data brought in from the antennas of radio telescopes. This is just one further purpose of GPUs. This furthers the point that these overwhelming prices and shortages of product must be solved. I cannot say I have an extensive knowledge on these systems but you do not have to be a savvy gamer or an individual that processes massive amounts of data to see that there is an issue in this market that must be solved. With the technological world expanding each day we must solve these problems before they become insolvable or have detrimental results.

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