Seeking Alpha

Justin Jaynes'  Instablog

Justin Jaynes
Send Message
I graduated with a BSEE from NCSU. Following technology companies and developments is a hobby of mine when I have free time. A few years ago I started investing, and have tremendously enjoyed it. I try and share a unique view from an engineering vice an investor standpoint, and enjoy learning... More
  • AMD's GPUs Are Worth Their Weight In Litecoins 20 comments
    Dec 6, 2013 1:04 PM | about stocks: AMD

    Not really, referring to my article's title. From my understanding, litecoins don't weigh very much.

    To get this out of the way, I understand very little about bitcoins or litecoins, so I apologize in advance if I make any miners cringe with my wording in this article.

    The one thing that I do understand, as do many other investors and techies, is that the value of both virtual currencies has seen a sharp rise recently.

    A Quick History

    Both bitcoins and litecoins are peer-to-peer digital currencies. Speculators do something known as "mining" in which they do not start hacking away at a fiber cable with a pickaxe in hopes of striking it rich.

    Bitcoin.org defines the terms mining and hash as the following:

    Bitcoin mining is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all Bitcoin users do Bitcoin mining, and it is not an easy way to make money.

    The hash rate is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.

    Devices that can perform many calculations in parallel are much better at mining than stronger serial processors. Think GPUs.

    Miners will setup somewhere in the spectrum from simple (single GPU to complex mining hardware (tons of GPUs or use of ASICs) in an attempt to increase the number of calculations that can be performed per second.

    As bitcoins have increased in value, technology companies have created specialized devices known as ASICs (application specific integrated circuit). These ASICs are far more powerful and efficient than simple GPU mining setups.

    A major difference between bitcoins and litecoins is the current value. Because bitcoins are very expensive, the market for bitcoins can support the use of these more expensive (specialized) ASICs. However, litecoins have recently started to increase in value, so as far as I know there are no/few ASICs available for mining litecoins, meaning mining via GPU is still a viable option.

    Nvidia Vs. AMD

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Joel Hruska of ExtremeTech (and various other sites) has an extensive write-up regarding performance of Adavnced Micro Devices (AMD) vs Nvidia (NVDA) regarding coin mining performance and efficiency. Read his article to understand how big this gap is. As one example, let me point out that the GTX Titan is a $1000 video card, whereas 7790's can be found on sale for ~$100-$120. When Joel originally wrote his article, the 7790 was a $150 card, meaning the value proposition is significantly higher now.

    In order for mining to be lucrative, the value of the coins mined must exceed the cost of gear plus electricity used to mine. AMD's cards seem to have an edge in overall performance and in power consumption vs calculations per second.

    Note: Due to the recent interest in litecoins, I have used benchmark data from bitcoins as it is more illustrative, but from what I have read on various forums and data sources (I, II), it appears that AMD GPUs are still more efficient at mining litecoins as well, allowing parallels to be drawn.

    Conclusion

    I am not suggesting this will be a meaningful source of revenue for an extended period of time going forward, nor should this article be construed in anyway as a recommendation for/against mining virtual currency.

    The importance of this I believe stems can be seen from comments made during the Q3 conference call:

    Hi, David. This is Lisa. Let me take the Graphics question. So, first, we've talked about Graphics as a multi-quarter growth strategy for us in terms of market share and we are certainly seeing that we are executing on that path.

    When we look at the third quarter relative to the fourth quarter and where we are going we have built a very strong product portfolio. We just announced our full lineup for the R7 and R9 Series and those were launched in September and shipping in October. So we did see a little bit of a transition at the end of the third quarter, but we do expect to gain share in the fourth quarter with our graphics business.

    AMD's Q3 GPU revenues declined significantly, and AMD stated the cause as being the transition to new GPU products. Wedbush estimated that console revenues accounted for ~$400M, meaning traditional GPU sales would have dropped to ~$270M, which is a pretty substantial sequential decline.

    However, this decline makes sense if the channel was being allowed to clear old inventory prior to the new GPUs shipping. Some tech sites harped on the fact that the majority of the R9 and R7 series graphics cards were nothing new as they used largely the same GPU chips as the 7000 series they were replacing, with the main exception being AMD's new Hawaii GPUs.

    Well, it seems as if the community is disagreeing with the tech sites. The R9 280X, which is a refresh of the 7970 GPU, is largely out of stock at newegg, as well as the 7970 GPUs. Notice the number of out of stock GPUs based on GCN architecture?

    The above screenshot is taken from CryptoCoinCharts in order to show how quickly the value of litecoins have exploded. Around November 15th or so is when the value seemed to begin the moonshot.

    The reason I say that this should not be depended on as a stable growth driver going forward is based on the volatility of cryptocurrency. If the value of litecoins implodes, so does the added value to AMD GPU cards. Or if Nvidia tweaks its GPU architecture, but that would not be an overnight change by any means.

    But for now, it seems that retailers are having little trouble moving AMD GPU inventory. I believe this will allow AMD to return closer to the historic $320M or so in GPU revenues during Q4.

    Disclosure: I am long AMD.

    Additional disclosure: I own both shares and options in AMD, and actively trade my position. I may add/liquidate or initiate a hedge at anytime.

    Stocks: AMD
Back To Justin Jaynes' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (20)
Track new comments
  • Thanks for sharing. I was trying to build a rig myself after experimenting with Litecoin mining. And I find the AMD GPUs are rare to find indeed. The design of Litecoin is to make it prohibitively expensive with ASIC, so AMD GPUs are going to rule Litecoin mining industry for quite a while.
    6 Dec 2013, 01:37 PM Reply Like
  • Thank you, I was waiting for article, but not every day is a green one. So looking fw for your next articles. Keep writing.
    Other theme: we have solved GF WSA agreement for 2014. But new FUDs are coming soon: GF low yield and worse maturity of 28 nm process than it is in TSMC, rise of expenses because quality and because to maintain two lines of manufacturers and their production specifics, and so on helping the shorts to continue the as-is state of SP development.
    I understand why AMD act way as acted last half of year with information, but otherwise I want to see SP over 5 soon. Not because I am going to sell, only for better sleeping ( not mine, my wife rarely asks me how it is going, and I often say: super, but AMD could do it better:). And she and me know what risk management is. And my position in AMD is going behind well managed risk portfolio. But not a lot, now... Everyday I want to buy more:)
    6 Dec 2013, 03:23 PM Reply Like
  • Justin
    AMD's GPU dvision has historically had revenues of USD 350 - 400 million. the last few quarters revenue fell because of a old product stack (in comparison to GTX 700 series) and notebook GPU market share loss. I believe AMD is looking to correct both. the R9 290 / R9 290X , R9 280X / HD 7970, R9 270X/ R9 270 are selling extremely well with only the 270 series being easily available while the other high end cards being out of stock and difficult to buy. This is without the Mantle factor. With BF4 and other titles like Thief, Star Citizen starting to introduce Mantle support that market share in discrete desktop GPUs could easily cross 40%. historically AMD's desktop discrete GPU market share has been around 35%.

     

    http://bit.ly/1dWbhek

     

    The Crystal series of notebook discrete GPUs is expected to improve AMD's notebook discrete GPU market share. I wouldn't be surprised if AMD's GPU sales hit close to USD 400 million by Q2 2014. Add another USD 400+ million from semi-custom chips and the visual computing could start to match the Computing products division from a revenue standpoint.
    7 Dec 2013, 12:52 AM Reply Like
  • Author’s reply » @rag - appreciate the reply - by chance do you have any info about crystal series, either than the stuff posted on WCCFTech or Fudzilla?
    7 Dec 2013, 01:01 AM Reply Like
  • justin
    No i don't have any extra information. I think CES 2014 might see a launch of the Crystal series. I am hoping AMD can clock a full Hawaii chip at a low 500 - 550 mhz and push voltage low enough to release a new flagship notebook GPU at 100w. this GPU even with low clocks will easily beat HD 8970M by 20 - 25%. I think 2014 is going to be a turnaround year for AMD. their product stack is looking strong.

     

    Q1 - KAVERI (Mantle, TruAudio, HSA) and CRYSTAL series
    Q2 - MULLINS, BEEMA, BERLIN
    Q3 - ARM SEATTLE
    Q4 - PIRATE ISLANDS (TSMC 20nm)

     

    But I think AMD's biggest surprise might be the next gen Excavator based 20nm server CPUs and AMD FX products which might ship by late Q4 2014 or early Q1 2015. Also we are likely to hear about more semi-custom design wins in 2014 and micro server related design wins (in H2 2014).
    7 Dec 2013, 01:28 AM Reply Like
  • Nice intro article to litecoin. Being familiar with the litecoin mining community I can attest that there's been a tremendous increase in interest in litecoin mining and that AMD is the only game in town. It's currently cheaper to invest in and should theoreticaly at least become equivalent to 1/3 the value of bitcoin which at current valuations means a target of ~300 USD. Consequently in the forums you read new members daily enquiring about investing in $10-20,000 in mining rigs which equates to 25-50 Radeon R9280x's. Even the average Joe will buy at least 4 Radeons a pop to join the mining community.
    This has created unprecedented demand but as a shareholder I only care about AMD supplying enough units and generating revenue from it. The cards being out of stock does not bode well that AMD will benefit much from this gold rush.
    Finally this demand could very well be a transient situation, even though ASICS may not be as groundbreaking in the litecoin mining as they were in bitcoin they could still negatively impact GPU mining and AMD's sales in the future. I'm long on $AMD
    7 Dec 2013, 12:07 PM Reply Like
  • Author’s reply » @Techno - thanks! As I stated, I know next to nothing about mining, but from the looks of it, and what I understand about the crypto litecoins use, it looks as if DIYers that want to build their own rigs will still be able to build something competitive with ASICs if/when they do come along due to the memory bandwidth required for litecoin mining.

     

    TBH, the reason I didn't state it would have a more meaningful impact is because as you say, stock is out of all these cards. If AMD were keeping the stock of cards up at the various retailers, I could see a much more meaningful impact during Q4. However, this should've cleared the channel so it will be easier for AMD to keep GPU sales up as they become available, imo.

     

    Lastly, I think the real significance is the fact that these GPUs are the most expensive, leading to higher shipments of the higher margin/higher ASP products, so the products that are selling are the ones that will be most accretive to the bottom line - all imo.

     

    I just wish AMD would stock the cards faster. I did tweet briefly with AMD's VP Mr. Roy Taylor.
    http://bit.ly/1gNnaks

     

    It looks like AIB partners still have some stock of 7000 series cards, and that will likely sell out as litecoin interest increases, and we'll still see some R9 280Xs and R7s come available as stock comes in throughout Q4 and early into next year. Also, part of the reason that the inventory was stated to build during Q4 was both new GPUs and console chips. We could see that GPU inventory depleted and converted to revenue during Q4 as well. As AMD shifts console chips to GloFo, that will allow more capacity at TSMC for GPUs - but CFO didn't state when in 2014 we could expect this - hopefully this is while the demand is still elevated.
    7 Dec 2013, 12:45 PM Reply Like
  • Justin, you're right litecoin mining predominantly impacts the higher end cards with presumably higher margins. The 7950 is the king of litecoin mining in terms of Kh/watt but it's been in short supply for the last several weeks and on eBay is now priced higher than a new board.

     

    I'd like to know AMD's position regarding the future of the 7950 as it does not currently have an equivalent in the R9 series. Will it still be produced or do they plan to replace it with a R9 version? The reason miners have shifted to the R9280x which is really a 7970 equivalent is due to the shortage of the 7950's.

     

    I too have noticed the 20-25% price increase in R9280x's in the past week and agree that the AIB and retailers are probably benefiting from this rather than AMD.
    8 Dec 2013, 09:57 AM Reply Like
  • Clearing out the 7000 series inventory is no small thing, even though most of the R7/R9 cards are re-brands. Your average consumer wants the latest and greatest, even if it exactly the same as a "year old" model. This way, AMD and the AIB partners won't have to discount or offer expanded game bundles to sell off the "old" cards. How much that helps AMD vs the AIB partners and retailers is anyone's guess.
    8 Dec 2013, 10:53 AM Reply Like
  • Author’s reply » @techno - apologies, but I can't find the tweet. I believe I remember seeing a tweet a while back mentioning one of the 7000 series cards being continued because there is no R* equivalent, but I can't find the tweet now to verify if it was the 7950 or not.

     

    If you're interested, try checking @amd_roy 's twitter feed. going back until the beginning of november or so - I did a quick check but couldn't find the tweet.
    8 Dec 2013, 11:15 AM Reply Like
  • Author’s reply » http://bit.ly/1eZGSbH

     

    Also, found this - along with some other various leaks - supposedly AMD is prepping an R9 280 version of the card which is the equivalent of the 7950 based on the Tahiti Pro die. But if yields are really good and AMD is selling every one of the R9 280Xs, it could likely be a little while before we see the 280 version appear since it would carry a lower ASP for the same silicon sold. yields are likely pretty good on this part now since it has been in production forever, so AMD would have to purposefully disable GCN cores to make it, which I can't see them doing if they're making more money by selling the 280Xs
    8 Dec 2013, 11:34 AM Reply Like
  • Author’s reply » @DP - I whole heartedly agree, and don't want to downplay that aspect of it. The only thing that makes me not depend on litecoins as a growing source of revenue moving forward (int the near future) for AMD is 100% purely due to the volatility of litecoins.

     

    The price of litecoins is down about 100% since I originally wrote this (middle of last week) from ~$40 to ~$20, based on China's decision surrounding bitcoins.

     

    Nvidia would have to update their architecture to put more focus on integer operations in order to make NV cards competitive with AMD. Maybe later with Maxwell we may see hashrates improved, but most leaks point to Maxwell being 6 months away or more, with a few pointing to a launch in Q1/Q2, but many after Q2.

     

    ASICs aren't quite as easy to design for lite coins because of the need for higher memory bandwidth, but there are always smart people that can figure out how to engineer whatever will make money. Litecoins were created to be competitively mined with consumer grade hardware, but there is no barrier to entry from ASIC mining, except the higher cost to build the ASIC due to memory requirements - at least from my understanding.

     

    If LTC price keeps going up, I expect to see ASICs created eventually. If LTC implodes, all this is a moot point. But while LTC prices are elevated, my guess is that we're a few months away from seeing ASICs, and at least 6 months away from seeing an Nvidia card appear that can remotely compete with AMD's cards on cryptocurrency mining. Right now the gap is huge.

     

    R9 270s, readily available cards at $200 price points, hit higher hashrates than GTX 780 Ti or Titan ($650 or $1000 cards) at a fraction of the power
    http://bit.ly/IwuNjq
    http://bit.ly/1cteIGg
    8 Dec 2013, 11:52 AM Reply Like
  • Justin, will a change in architecture by Nvidia really lead to better crypto mining performance? AMD's adoption of OpenCL for their gpu compute units as opposed to Nvidia's proprietary CUDA is mainly why Radeon's are so superior in mining performance. Has Nvidia stated adoption of OpenCL?
    8 Dec 2013, 08:40 PM Reply Like
  • Author’s reply » @Techno -
    It isn't necessarily in regards to supporting/not supporting OpenCL. AMD's cards seem to excel at OpenCL tasks, but Nvidia supports OpenCL as well.
    http://bit.ly/1hH6XAu

     

    You really have to look at the hardware differences between AMD and Nvidia. For example, AMD uses more processor clusters than Nvidia at a hardware level. Hawaii uses 36 GCN compute units I believe, whereas Nvidia uses 15 (or 14, can't recall) SMX compute units in their flagship cards. AMD's cards also handle integer operations differently.

     

    It's a long read, but Joel breaks it down really well - so if you're interested in the hardware aspects, really dig through his article and take time to absorb it

     

    http://bit.ly/11NGM4P

     

    "AMD plays things close to the chest when it comes to Graphics Core Next’s (GCN) 32-bit integer capabilities, but the company has confirmed that GCN executes INT32 code at the same rate as double-precision floating point. This implies a theoretical peak int32 dispatch rate of 64 per clock per CU — double GK104′s base rate. AMD’s other advantage, however, is the sheer number of Compute Units (CUs) that make up one GPU. The Titan, as we’ve said, has 14 SMX’s, compared to the HD 7970′s 32 CU’s. Compute Unit / SMX’s may be far more important than the total number of cores in these contexts."

     

    AMD's cards just handle the code better, process it slightly differently, and the way the cards are architected seem to have a higher throughput. Most of what I'm basing this on is from Joel's article, but AMD also has a whitepaper describing the advantages of GCN architecture, but it's *thick*
    http://bit.ly/1hH6X3h
    8 Dec 2013, 08:57 PM Reply Like
  • Thanks for clarifying that Justin. Would Nvidia be capable of improving their compute units with the same die size? One of the remarkable things about the R9 series is the dramatic increase in performance with a relatively small die size/ shrink.
    8 Dec 2013, 09:09 PM Reply Like
  • Author’s reply » @Techno -

     

    It would, but it would take time. NVDA makes good products, but a main focus of AMD's cards this generation has been heat and noise.

     

    Noise can be eliminated via more expensive coolers, but heat is a function of frequency and workload. If a GPU is worked to its max, it will generate more heat, and it will take a more expensive cooler to keep it from operating at higher temperatures.

     

    Hawaii die size is significantly smaller than Nvidia's GK110 and 110B GPU dies used for the 780 and 780 Ti, which will make it harder for Nvidia to be price competitive.

     

    Most leaks/info I have seen point to Maxwell being a 20nm product, which means it will likely be Q3 or so next year before we see any real volumes of a truly new GPU from Nvidia. All this could change though as it's largely based on leaked info which is often wrong.
    9 Dec 2013, 09:35 PM Reply Like
  • Justin couldn't AMD more easely increase prices and, at the end of the day, have better margins?
    7 Dec 2013, 12:59 PM Reply Like
  • Author’s reply » they could - but then what would that do to their consumer base?

     

    But from the looks of it, retailers are already jacking the price of the cards up. R9 280x cards are going for $360+ on newegg - approaching r9 290 prices.
    http://bit.ly/1hENmkh

     

    R9 290s debuted at $399 - and the price has been jacked up to $450+
    http://bit.ly/1hENmkl

     

    My *guess* is that all/most of this increase is going to the retailer though, and not AMD
    7 Dec 2013, 01:33 PM Reply Like
  • R9 290 is out of stock everywhere from every manufacture ( gigabyte, MSI, powercolor, ASUS ) . This is huge. Not even list in inventory for tigerdirect .com . This is exceed the expectation . Nobody from AMD expect the booming of the bit/litecoins . The revenue from the GPU will be unprecedented high.
    Now AMD have 2 products that demand >>> supply ( consoles and GPU) . Can't wait for Q4 earning report.
    8 Dec 2013, 08:09 PM Reply Like
  • I totaly agree...Can't even find PS4's or Xbox ones in stores...It will be an interesting Q4. Think what might happen if AMD was to announce another major client for servers...wow!
    8 Dec 2013, 08:22 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • $AMD - submitted my earnings article and fast tracked.
    19 minutes ago
  • "on track to tackle the one or two semi-custom design wins" $AMD
    about 3 hours ago
  • $AMD con call at 5:30 ET
    about 4 hours ago
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.