Nvidia’s conflicting relationship with crypto mining by proactive investors

There was a jibe circulating when OpenAI’s major language chatbot ChatGPT was just entering the zeitgeist that within two weeks it already had more documented use cases than cryptocurrency and blockchain technology.

It’s hard to disagree. A bit like mice, it’s said that you’re never more than six feet away from a ChatGPT user, whether they’re a journalist, coder or Nick Cave impersonator.

Blockchain users and crypto enthusiasts, on the other hand, tend to get stuck in their own circular feedback loop, self-perpetuating because they all follow the same 50 Twitter accounts.

Every now and then a Sam Bankman-Fried or Do Kwon will pop up in the news to remind people that crypto is still a big deal, but for the most part it remains an esoteric market made up of magic internet money prayers.

But if there’s one observable use case for crypto, it’s that it’s made some businesses and individuals like a**t tons of money.

Take Nvidia, the American multinational technology company whose high-spec graphics processing units became the device of choice for non-Bitcoin cryptocurrency mining.

Exactly how much Nvidia has raised from GPU sales to crypto miners is impossible to know, because the firm never recognized mining as a separate line on its balance sheet, lumping it instead within the gaming segment.

But rest assured it was not change; the large GPU shortage in 2021 was partly due to the increase in demand for crypto mining rigs amid a rally in crypto prices.

Anti-crypto, crypto-adjacent company

Despite this buying bonanza, Nvidia sought to effectively limit its cryptomining customer base by implementing ‘Lite Hash Rate’ (LHR) technology in its GPUs, which reduced the cards’ ability to mine for ether and other non-bitcoin cryptos (Bitcoin requires a specific computer called an ASIC to mine).

Miners, being the enterprising bunch that they are, quickly managed to exploit a fix that unlocked the GPUs’ full mining again.

Subsequent GPUs then used a beefed-up LHR protocol, while Nvidia launched the mining-specific CMP (Cryptocurrency Mining Processor) card with little to no fanfare in 2021.

In what was probably an extremely handsome margin, CMPs were selling for as high as US$4,300 at the time.

According to Nvidia’s 2022 annual results, CMP sales brought in $550 million in revenue, which was just 2% of total group revenue, but given how mainstream GPUs remained popular for mining, crypto-derived revenue was likely much higher.

The opacity of Nvidia’s crypto-derived revenue actually became a legal issue when in May 2022 it was fined US$5.5 million by the US Securities and Exchange Commission (SEC) for failing to disclose that cryptocurrency mining constituted a “significant element of its material their. earnings”.

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“NVIDIA’s disclosure failure deprived investors of critical information to evaluate the company’s operations in a key market,” Kristina Littman, head of the SEC Enforcement Division’s cryptoassets and cyber unit, said at the time.

AI for an eye

Through Nvidia’s historical aversion to acknowledging its profit-generating crypto-mining customer base, the group has never been outspoken about its disdain for the sector.

Until, in a recent interview with The Guardian, technology chief Michael Kagan exclaimed: Crypto does not bring “anything useful to society … I have never believed that (crypto) is something that will do anything good for humanity.”

On the other hand: “With ChatGPT, everyone can now create their own machine, their own program: you just tell it what to do, and it will. And if it doesn’t work the way you want, you tell it “I want something else”.

It’s a unique position for a company to be in: Intentionally dissuading a very lucrative customer base from buying your products.

It could be argued that it’s an ethical choice due to cryptomining’s environmental impact, but Kagan’s statements seem to suggest that Nvidia simply doesn’t “vibe with” the cryptomining sector and prefers to distribute its GPUs to more deserving customers.

Such as OpenAI, which used around 10,000 Nvidia GPUs to build ChatGPT.

It says a lot about where Nvidia sees its financial and philosophical future heading.

Read more at Proactive Investors AU

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