Nvidia has officially pulled out of the cryptocurrency mining business over declining GPU sales and dwindling profits

California chipmaker Nvidia Corp (NVDA) has officially pulled out of the cryptocurrency mining business over declining GPU sales and dwindling profits. However, a closer look at the mining landscape reveals that competition, and not declining demand, is at the root of Nvidia’s decision to exit the industry.

Nvidia Quits Crypto Mining Business

Colette Kress, Nvidia’s CFO, announced the decision last week in a report that was published by The Wall Street Journal.

“We believe we’ve reached a normal period as we’re looking forward to essentially no cryptocurrency as we move forward,” Kress said. “Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million, and we now expect a negligible contribution going forward.”

The company, which is best known for developing chips for supercomputers and video game systems, experienced an upsurge in GPU sales last year as miners rushed to capitalize on the crypto boom. Earlier this year, Nvidia revealed for the first time how much revenue it generated from crypto market sales. Nividia’s first-quarter chip sales to cryptocurrency miners hit $289 million, far exceeding forecasts of $200 million.

Despite better than expected results, the company warned of a steep fall in subsequent quarters as mining profitability plummeted.

“Crypto miners bought a lot of our GPUs in the quarter and it drove prices up,” Nvidia CEO Jensen Huang said on a Q1 earnings call back in May.

Nvidia may be exiting the crypto mining business, but its overall profitability is as good as ever. For the quarter ending July 29, profits nearly doubled to $1.1 billion, or $1.76 a share. Revenues surged 40% to $3.12 billion. Both results beat analysts’ forecast.

Bitmain’s Growing Dominance

Following a series of acquisitions and funding rounds, China’s Bitmain has emerged as the world’s biggest blockchain conglomerate. The company, which is valued at $19 billion, generated $1.1 billion in profits during the first quarter. Bitmain’s crypto venture earned 65 times more profit than Nvidia during the quarter.

Bitmain’s profitability suggests that demand for mining equipment remains strong despite the seven-month downturn in cryptocurrency prices. What’s more, bitcoin’s hash rate has increased significantly this year, offering further evidence of continued growth. Bitcoin’s hash rate has risen 100% amid the downturn. What’s more, the hash power that has come online since the end of last year is equivalent to more than 2 million SHA-256 ASIC. Each of these units is valued at roughly $1,800.

The real issue for Nvidia isn’t that crypto mining is on the decline but that demand for GPU-specific equipment has fallen. That’s because only a handful of cryptocurrencies and tokens can be mined using GPU equipment.

Also read: Bitmain may be losing its advantage in developing miners amid other potential cash-flow issues

Source: https://hacked.com/nvidia-pulls-out-of-cryptocurrency-business-amid-declining-profit/