Today, analysts are talking about the newly released NVIDIA third-quarter earnings report. In general, there is a big upswing of 21% for a total of $3.18 billion in revenue for Q3.
However, within that number, the category for mining Graphics Processing Units (GPUs) has slumped, leading to increased inventory according to NVIDIA founder and CEO Jensen Huang.
“The crypto hangover lasted longer than we expected,” Huang said, according to Reuters. “We thought we had done a better job managing the cryptocurrency dynamics.”
Huang told reporters that a formerly hot cryptocurrency market had boosted demand for gaming cards that are also used to mine cryptocurrencies; however, from the beginning of 2018, a decline in demand cooled the market off.
GPUs have an interesting history: originally pioneered as a way to skillfully render complex computer graphics on the fly, GPUs have now replaced single-core chips to bring the power of parallel processing to many different tasks. They are much used in AI/ML, and also in crypto mining, which uses prodigious amounts of computing power.
NVIDIA leaders waiting for GPU demand to pick up again this past summer were disappointed and as a result, the company’s inventory ledger line swelled to $70 million for Q3. That coincided with a decrease in gross margins.
Many analysts link NVIDIA’s GPU decline to less profit for cryptocurrency minors. An article in BTCManager covering this lower demand for the GPUs talks about how mining profit margins have tightened up.
A Forbes article on mining profits shows how this happens – as Clem Chambers points out, block rewards and other factors are quite volatile just like market prices.
“Difficulty can rocket up if it suddenly gets hit by lots of mining power,” Chambers writes. “The coins winnable by a given mining power will therefore drop, but likely as not, the increase in mining power may come from a demand for the coin and therefore a price rise may compensate the miner in dollar terms … with so many variables at play, the real ‘mining reward’ that matters is how much money you are going to make mining and I denominate that not in BTC or altcoins mined but in dollars … This income will fluctuate dynamically dependant on all sorts of other permutations, which amounts to an outcome best looked at in a stochastic way or at least as some kind of optimization.”
Also, he adds, not all miners are playing by the rules – but there is a built-in “integrity” to be recognized.
“Whereas there is without doubt lots of flim-flam in the cryptocurrency space, especially in non-minable coins and tokens, mining is real, costs money, takes effort and skill and can’t be faked,” Chambers writes. “As such, it is a solid signal of what is going on under the hood of the market.”
One way to track mining environments is to look at hardware, as those scouring the NVIDIA report are doing. Other factors, though, involve the popularity of crypto in general, where markets can often look a little like high school: if everybody’s doing it, prices go way up. Keep an eye on mining news to understand where coins are headed.