Nvidia, the graphics chip and card manufacturer, reported Q2 2019 earnings yesterday and Graphics Processing Unit (GPU) revenues were down thanks in large part to a “substantial decline in cryptocurrency GPU” according to CFO commentary on the results.
After an extremely strong showing the previous quarter, the graphics card maker saw small declines in both overall revenues and net income this quarter. The stock sold off 4.5% in overnight trading after the results were released.
Cryptocurrency GPU Mining and the Shift Towards ASICs
Nvidia may be seeing the impacts of the extremely turbulent past few months for the cryptocurrency markets as many of the top coins have shed billions of dollars of market capitalization.
Last quarter, the company had already downgraded their cryptocurrency GPU revenue estimates to $100 million for the quarter but actual revenue came in at just $18 million. The company’s CFO, Colette Kress, now no longer expects any significance out of the crypto side of the business:
But Nvidia’s cryptocurrency GPU business may also have been affected by one another large chip maker, Bitmain.
Bitmain, the 800-Pound Gorilla in Cryptocurrency Mining
Bitmain is a Chinese-based chip manufacturer of Application Specific Integrated Circuits (ASICs) and cryptocurrency mining equipment designed to specialize in specific tasks. Up until recently Bitmain had focused on creating equipment for mining Bitcoin, but in April the company announced it would also be releasing a product to mine Ethereum.
Ethereum, in its initial incarnation, borrowed much from the design of Bitcoin, but one area where it differed was in the algorithm it used for mining or validating transactions. The algorithm was designed in such a way to make it easier to mine with standard off-the-shelf equipment like graphics cards but harder to mine with specialized and expensive equipment using ASICs.
Bitmain’s Antminer E3 product, which will retail for $1262 USD and ships later this month according to their website, is designed specifically to compete with Nvidia’s cryptocurrency GPU business.
Nvidia must see the writing on the wall in discounting the cryptocurrency GPU business. Bitmain just keeps raking in the profits, reportedly earning over $1 billion in their first quarter this year. The Chinese manufacturer is also about to raise even more money through an upcoming IPO. Given the large amounts of capital which Bitmain is pulling in, one wonders what other parts of Nvidia’s business it is coming after.