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Nvidia: A Crypto Crash Doesn't Mean A Crash In Graphics Card Sales

Jul. 01, 2022 8:36 AM ETNVIDIA Corporation (NVDA) StockAMD77 Comments


  • Media reports imply an imminent crash in graphics card demand.
  • What’s wrong with this picture?
  • A detailed calculation of crypto revenue on a quarterly basis.
  • Investor takeaways.
  • This idea was discussed in more depth with members of my private investing community, Rethink Technology. Learn More »

NVidia Endeavor Headquarters in Santa Clara

vzphotos/iStock Editorial via Getty Images

Recent reports have claimed that most of Nvidia's (NASDAQ:NVDA) revenue from the RTX 30 series of graphics cards is due to crypto. In this article, I demonstrate why that cannot be true and present a more

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This article was written by

Mark Hibben profile picture

Mark Hibben has a masters in Electrical Engineering from USC and is an independent iOS developer utilizing his experience working in the technology sector to inform his investing decisions. He is the leader of the investing group Rethink Technology.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (77)

Austin Craig profile picture
I'd bet on a lot of cards slamming the market after having been sucked up by GPU miners for the last few years.

The last time this happened the stock took a pounding.

Factor in a recession and .... yea....
@Austin Craig Nvidia may delay RTX 4000 GPU launch due to oversupply of RTX 3000 | PCGamesN

productivityLeaps profile picture
Thanks, Mark, for taking the time to model and perhaps ultimately quantify what I've suspected is the case; gamers will continue to buy NVDA GPUs as their favorites regardless what happens to GPU related crypto mining.

In "Nvidia Game Card Prices Fall Along With Crypto Mining Demand" where they point to 50% declines in GPU secondary market prices, isn't that from 2x or even 3x what they were sold for previously on those same markets? That would be to suggest a $2,000 GPU increased to $4,000 during the Great GPU Shortage, then declined by 50% to, well, you guessed it, $2000.

While I can see the eventual flooding of the market when ETH goes POS (vs. current POW), NVDA did well to have the 4000 series at-the-ready. To your overarching, nearly final point: All that's happening here is gamers finally get to pay reasonable and even MSRP vs. getting scalped.
@productivityLeaps GPU Prices, June 2022: Supply Up and Demand Down

productivityLeaps profile picture
@6065041 This is aged. Seen it a number of times already and posted here. Did you think critically thru it and do the math?
Joshua Kunken profile picture
AWS will have greater access to GPUs and cost per GPU hour on AWS will likely drop soon... good for AWS cloud clients
Reduced demand isn’t only from crypto. Though that is a part of it.
productivityLeaps profile picture
@Mr Nobodi Counting on the recession, huh? If it is a recession (and no, just two negative quarters of GDP growth in a row doesn't necessarily qualify), it'll be shallow.
Chip Boom Loses Steam on Slowing PC Sales, Crypto Rout…..WS Journal July 4th

Mark Hibben profile picture
@6065041 Let me just point out that Nvidia guided to a 24% y/y gain in revenue for fiscal Q2 that they have not backed off from or offered revised guidance, which they would if things were as bad as you and many others like the WSJ seem to think.
Yes, there will be a sequential decline in Gaming segment revenue, but this is within normal seasonality and will probably be flat y/y. Given the shortages that existed last year, that says a lot.
The fact that supply and demand are finally coming back into balance does not mean that sales are crashing. It does mean that prices are coming back to normal and gamers can finally buy graphics cards at reasonable prices.
Finally, why are you so focused on Nvidia? Don't you think that everything you claim about the GPU market also applies to AMD and Intel?
@Mark Hibben yes Amd as well as Nvidia will be impacted negatively with a glut of used gpu’s flooding the market by crypto miners.
@6065041 will there really be much of a buyer's market for those, though?
Lack of gpu demand problem for Nvidia
@6065041 well, if they are rumored to launch / announce 4000 series this year, why would you buy a 3000 card? I sure am still waiting as are everyone else I know at this point.
productivityLeaps profile picture
@6065041 Do you review those articles carefully and think critically through them?
History showed that old mining rig GPU were being brought at exceedingly low costs when crypto crashed back in 2018/19. This glut of used GPU fouled the inventory stacks for about 18 months after the crypto crash.

Ethereum to change approach to mining, further eroding demand
$15 billion spent on GPUs by crypto miners, not gamers, in 2021

Read more: www.tweaktown.com/...
Morgan Stanley: GPU Demand Likely to Slow if Ethereum Moves to Proof-of-Stake

Used graphics card prices fall up to 50% as more cryptominers sell their GPUs

productivityLeaps profile picture
@6065041 From what base price and where are they selling in the secondary market vs. MSRP?
Just one critique that would be relavent to your analysis there are also ASICS mining ethereum not just GPUs some people put the estimate as high as 50% of the hashtags. Nobody knows for sure. If you factor this in the impact could be even less than your calculations.
longnose profile picture
simply amazing concept live digital twin - this is revolution

@longnose Thank you for the link. I think this is going to be huge. Amazing our stock price didn't react much to this announcement. sentiment is off the charts low. People who sold the stock as well as parties the refused to buy based on valuation, in my opinion will have major regrets.
Westn_Mind_Eastn_Heart profile picture

VR Hype never materialised.
Metaverse is also a Hype. I don't want/need to look at some fake cartoon character of my friend in order to talk to him.

Bet only on real traction/growth. Ignore hype
bubbleking profile picture
@Westn_Mind_Eastn_Heart what’s that have to do with the video?
r Negoro profile picture
A normal guy gaming will buy one gpu.
A miner will buy 20.
When gpu is unminable, miners typically sell their mining gpus. Thats it.
So it is a slow churn towards a flood of gpus.
josephaoppenheim profile picture
The crypto crash is starting to have a contagion effect like the 2008 subprime mortgage crisis, unregulated and extreme leverage.

Thus, the contagion will also effect lots of companies and people which have nothing to do with crypto.
bubbleking profile picture
@josephaoppenheim don’t you mean more like 2018?
josephaoppenheim profile picture
@bubbleking absolutely not, 2008, the subprime mortgage crisis which created CDO’s and other impossible to understand SIV’s, sold worldwide for high income. Similar to crypto stable coins which offered high interest by crypto pseudo banks. Also, like crypto’s and pseudo banks, went global.
@bubbleking How crypto mining collapse caused Nvidia to lose $23 billion in market value in 2018

How crypto mining collapse caused Nvidia to lose $23 billion in market value link.
From 2018 crypto winter.
It’s not just Nvidia gpu’s that crypto miners will flood the market…but also AMD gpu’s that creat an inventory backlog for Nvidia

02 Jul. 2022
Jesus man so much fud out here on Invidia it must be about to squeeze or something.... Absolutely a joke that you can't find any contrary beliefs to the fact that NVDA is oversold I'll take my 149 shares long. If anything near 100 comes I'll morgage my house.. everyone trying to short Tuesday a.m. is gonna get smoked. Fair warning ⚠️
Westn_Mind_Eastn_Heart profile picture
Nvidia was my first multi bagger. Bought at $8 in Dec of 2015. Went all in with Leaps/options and made a killing when it up in 2016.

Like any other sad ending of an investor, I exited too early, thanks to a fraud short seller called Citron

Anyways, situation Now is different. PS ratio is bloated, PE is bloated, Revenue had peaked and is decelerating ( $8.2B -> $8.1B), market trend is down.

Absolutely NOT a time to be long. In fact it is the best short hiding in the plain sight.

AMD is a much better buy, if at all you want to be long on something.

I am mostly cash and just started shorting NVDA
Mark Hibben profile picture
@Westn_Mind_Eastn_Heart Citron's game was obvious at the time and I didn't fall for it, making huge returns in the process. So I hope you'll understand if I don't take your advice this time around.
Westn_Mind_Eastn_Heart profile picture
@Mark Hibben

Absolutely Mark. Good luck. By the way, I have a stop loss in my short position and will exit if it starts going up.
@Mark Hibben I really liked your article, but you just signalled that you don't believe what you have written. Condescending behavior, when one tries to devalue another and flag someone else's inferiority, is always pure unadulterated insecurity.
www.tomshardware.com/... Wonder how far they'll drive this down. Seems like slowdown should be priced in
Bob Kleinberg profile picture
Thanks for an outstanding analysis.
The coming recession will affect most tech stocks. I think Nvidia will bottom out at 100 around August-September time before it goes back up.
@Industry_veteran $80 or bust
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