At least one major tech-sector analyst is predicting a serious decline in sales for graphics card manufacturers in the second half of 2018, and they’re pointing the blame squarely at Bitmain. In a report to clients released today, Susquehanna analyst Christopher Rolland explained that recent demand for both AMD and Nvidia GPUs has been largely driven by a serious shortage of cryptocurrency mining ASICs. That situation is likely to change in the second quarter of 2018, with cryptocurrency hardware maker Bitmain on the verge of releasing their Antminer F3, a dedicated Ethereum mining system. As a result, Susquehanna lowered AMD’s rating to “negative” (from “neutral”), and reduced its price target for AMD shares.Even though GPU demand has risen to record levels thanks to cryptocurrency mining, GPU makers have generally been reluctant to embrace the market. This attitude began to change in 2017, as miner demand soon outstripped GPU supply, resulting in severe retail shortages. Both AMD and Nvidia have seen massive increases in their stock price during the cryptocurrency boom, roughly coinciding with the “halving” of the bitcoin block reward in July of 2016. (At the time of the “halving,” Nvidia shares sold for around $32, close to its then all-time high. Today, Nvidia shares are worth about $245.)
One of the primary drivers of this demand was the rising price of Ethereum, which grew from around $12 in mid-2016 to around $1,370 in late 2017. Ethereum uses an “ASIC resistant” hashing algorithm, which is suited for GPU mining. As with all cryptocurrency mining, the efficiency of the mining hardware plays a huge role in the equipment miners invest in, often requiring a bitcoin calculator just to see if a given setup will be profitable.
A dedicated Ethereum ASIC like the Antminer F3 would handily outperform a similarly priced GPU. If Susquehanna’s analysis is correct, the introduction of Bitmain’s dedicated Ethereum mining hardware could mean the end of the GPU gold rush. That could easily send AMD and Nvidia into an earnings tail spin.
“During our travels through Asia last week, we confirmed that Bitmain has already developed an ASIC for mining Ethereum, and is readying the supply chain for shipments in 2Q18,” Rolland said in his analysis. “While Bitmain is likely to be the largest ASIC vendor (currently 70-80% of Bitcoin mining ASICs) and the first to market with this product, we have learned of at least three other companies working on Ethereum ASICs, all at various stages of development.”
One of the “competitors” mentioned in Rolland’s report is almost certainly electronics giant Samsung. The company has been rumored to be quietly testing its own line of cryptocurrency mining ASICs since late last year. Those rumors were confirmed in January, when it was leaked that Samsung was working with a Taiwan-based chipmaker TSMC on the project. Between Samsung, Bitmain, and two yet-to-be-revealed competitors, it looks like the days of easy money from cryptocurrency miners will soon be over for AMD and Nvidia.