Effects of Cryptocurrency Mining on GPU Manufacturers stock price

Darren Lim, SUNY Buffalo Economics
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Stock price trends of Nvidia

Over the last two years, there has been a near tenfold increase in the share price of Nvidia from a trough of less than $30 per share in February 2016 to near record highs of $216.96 at the time of writing (November 24) with a market capitalization of $131 billion. By contrast, returns on the SPDR S&P 500 Trust ETF, which tracks the S&P 500 gave an increase from $191.92 on 8/1/2016 to $260.37 on 24/11/2017; a 35.67% increase.

Tracking this dramatic growth in the value of the company is the corresponding growth in net income. From FY2015 to FY2016 (written in the Nvidia website as “Year Ending Jan 2016” and “Year Ending Jan 2017” respectively), total net income has grown from $614 million to $1.67 billion; a 271.98% increase year-on-year. Total EPS has also gone up from 1.08 to 2.57.

Most, if not all of the increases in Nvidia’s share price occurred after May 6th, 2016, with the announcement of the release of their new generation of GPUs codenamed “Pascal”, which uses the 14/16nm manufacturing process over the 28nm process in the previous generation “Maxwell” chips. The significance of this is that it allowed for an increase in transistor count while simultaneously allowing for a shrinking of the die size, allowing for improved computing performance while maintaining acceptable power consumption levels. For comparison, the previous generation GTX 980 Ti (Maxwell) possesses 8 billion transistors in a die size of 601mm2, while the current generation GTX 1080 Ti (Pascal) has 12 billion transistors in a die size of 471mm2 which is a 50% increase in die size and a 27.6% decrease in die size; both are similarly rated for 250W (Smith, 2017). The significant increases in performance per watt would have enticed miners, especially industrial scale miners to switch to the new GPUs, boosting Nvidia’s sales. Relatively speaking, the picture of Nvidia is easier to paint as they sell only one product on the consumer level: GPUs.

Stock price trends of AMD

The story of AMD is more complicated due to the fact that they design and produce CPUs in addition to GPUs as part of their consumer lineup, with AMD trailing Intel and Nvidia in terms of market share for both the CPU and GPU markets respectively as AMD had for years, failed to challenge the two companies in the high performance segment of the processor market, leaving Intel and Nvidia with the lion’s share of their markets.

AMD share prices have made similar leaps over the last two years, from its bottom of $1.83 per share on February 12, 2016 to its peak of $15.20 on February 27, 2017, with a total market capitalization of $11.14 billion. The gains in share prices represented an 8.3 times increase in the value of the equity in the span of just one year. On the other hand in seeming contrast to share prices, since Q4 2014, AMD has suffered continuous net losses with no quarter seeing a net profit up to the point of writing, where Q3 2017 earnings have been posted (Ycharts, 2017). However, net losses have decreased from its peak of $922m in losses in Q3 2015 (not shown in graph) to the latest quarter of Q3 2017 where losses were $69m. Due to this, P/E ratios have not been posted due to negative EPS figures.

However, in spite of negative net revenues, AMD share prices have risen in a similar pattern to Nvidia, rising around the time of major product releases. The AMD “Polaris” series of GPUs has made a similar transition to the 14nm manufacturing process from the previous 28nm process, enabling similar leaps in performance. Share prices increased after the release of the RX 400 series GPUs, with a smaller increase following the release of the RX 500 series refresh a year later (Smith, 2016). One caveat to this is that share prices would have been also driven up by hype surrounding AMD’s release of its latest CPU series “Ryzen” up until its release in March 2017.

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