Crypto Crash can cause problems for graphics card manufacturers
Cryptocurrencies have lost about two-thirds of their total market value since peaking in November 2021, and even dominant virtual currencies such as Bitcoin have seen prices plummet. The crash is driven by several factors that are driving investors away from more risky assets, including rising interest rates, the Russian invasion of Ukraine and inflation. But the impact of a falling crypto is not limited to holders of digital tokens. As cryptocurrency prices have fallen, so have the prices of hardware and other equipment commonly used in the digital currency industry for mining and other functions.
Two of the major players in the graphics card market, Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA), has seen the prices of graphics processing units (GPUs) fall well below the manufacturer’s guide price (MSRP). According to a June 19 report from technology data analytics firm 3DCenter, AMD’s current generation graphics cards, also called GPUs, sell for approximately 92% of MSRP. This is a decrease of 10 percentage points in less than a month. NVIDIA’s comparable GPUs have also fallen, but at a slower speed.
It is important to note that although the stock prices of AMD and NVIDIA have fallen sharply from their peaks, both stocks have still outperformed cryptocurrencies such as Bitcoin over the past year. (see table below).
Important takeaways
- The prices of some current-generation GPUs, also called graphics cards, have coincided with the plunged cryptocurrency industry.
- The prices of leading GPUs have fallen by various margins, and AMD products have fallen further than NVIDIA’s.
- GPU usage for cryptocurrency mining may decline as investors turn away from cryptocurrencies due to inflation, geopolitical factors and changing interest rates.
- The share prices of AMD and NVIDIA have fallen sharply from their highs in the autumn of 2021, but both shares have still performed better than cryptocurrencies such as Bitcoin.
Link between cryptocurrency and falling prices
The recent fall in GPU prices may have been driven in part by cryptocurrency crashes and its broad ripple effects on industry. GPUs have been used in the process of extracting virtual currency tokens and have at times been in short supply during the crypto boom. Demand for GPUs may fall if investors turn away from cryptocurrencies or if energy-conscious crypto developers increasingly seek more efficient ways to generate new tokens. In fact, changes in cryptocurrency mining have already affected the GPU market before.
A fall in the crypto industry does not necessarily mean that graphics card manufacturers will be affected as much in the future. As interest in GPUs for cryptocurrency mining declines, customers seeking these products for other applications, including games, may increase demand instead. This may favor Nvidia’s products. Some rankings have placed NVIDIA GPUs higher on the bestseller lists for games compared to other manufacturers.
AMD and NVIDIA Stock Performance
AMD and NVIDIA have also diverged in terms of share performance. The share prices of both companies have coincided with the price of Bitcoin since they reached peaks in the autumn of 2021. However, none of the companies has seen such a sharp fall in the share price compared to the price of Bitcoin in the past year. As of June 23, the price of Bitcoin has fallen by approx. 38.7% in the last year, while AMD has delivered a 1-year subsequent total return of 0.2%. NVIDIA shares have given a 1-year subsequent total return of -14.6% during this period. Both shares have surpassed not only Bitcoin, but the broader market, as the S&P 500 has a 1-year subsequent total return of -11.5% for the period.
The bottom line
As cryptocurrencies have fallen due to economic turmoil, the prices of GPUs used to recover them have fallen in turn. This has affected the shares of the GPU duopoly, Nvidia and AMD, which have fallen, but less than Bitcoin has.
