Weaker Crypto Mining Demand Sees GPU Prices Fall

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In Brief
  • Graphics processing units, popularly used for mining cryptocurrencies, are dropping in price, as Ethereum anticipates migrating to a proof-of-stake model.

  • Although prices for GPUs have fallen, they are still being sold at a premium, albeit a smaller one.

  • Others speculate that the drop in graphic chip prices could lead to an unexpectedly quick ending to a global chip shortage.

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Graphics processing units, popularly used for mining cryptocurrencies, are dropping in price, as Ethereum anticipates migrating to a proof-of-stake model.

GPU prices have been falling, and one reason for the drop may be weakening demand for cryptocurrency mining. While GPUs are considered essential hardware for cryptocurrency mining based on the proof-of-work consensus mechanism used by many popular cryptocurrencies, including Bitcoin, Ethereum’s switch to the proof-of-stake model will effectively make them redundant for that purpose. Last year, a spike in the price of Ethereum led to a similar boost for GPUs prices.

Prices drop

Although prices for GPUs have fallen, they are still being sold at a premium, albeit a smaller one. The markup over manufacturer suggested retail price or MSRP has fallen to 41% from 77%, said Susquehanna analyst Christopher Rolland. Additionally, the price of AMD’s Radeon RX6000 and Nvidia’s GeForce RTX30, steadily dropped from 80% above MSRP at the beginning of the year to less than 20%, according to graphics chips and hardware news site 3DCenter. However, Reuters reported that Nvidia’s GeForce graphics cards were still unavailable at retailers like BestBuy and Newegg Commerce.

Meanwhile, the Philadelphia SE Semiconductor Index is down 22% this year, Nvidia shares are down roughly 31%, and those of rival Advanced Micro Devices have dipped roughly 37%. Earlier this year, hackers claiming to have infiltrated Nvidia servers attempted to sell a way to unlock graphics cards for Ethereum mining. 

Following the drop in GPU prices, Baird analysts downgraded Nvidia to “neutral,” but Bank of America still believes weakness in crypto mining segments could be supplemented by demand from data centers, reaffirming its “buy” rating for Nvidia.

Chip shortage

Others speculate that the drop in graphic chip prices could lead to an unexpectedly quick ending to a global chip shortage. The issue is sure to be key for companies reporting results this week, including Intel, who is planning a multi-billion dollar expansion, and Qualcomm. 

Other processors such as CPUs and some memory chips have also seen their prices shrink due to contracting demand from PC and smartphone markets. Summit Insights Group analyst Kinngai Chan anticipates an oversupply of some other chips made on older machines in the second half of this year.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage.

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