Bitcoin's 'civil war' probably won't impact Nvidia and AMD — no matter of who wins (NVDA, AMD)
The end of the Bitcoin war is fast approaching and the winners are not yet clear.
Bitcoin has been embroiled in a dramatic civil war for the last several years. The bitcoin platform has not kept up with its user and transaction volume growth as its price has skyrocketed. This has led to what is being called a "civil war" between bitcoin developers and miners.
There are several potential solutions for speeding up the platform. Until last week, the solution known as Segwit2x was heavily favored to win the war and become the standard after the August 1 deadline. Then, bitcoin cash came along. The new solution is a fork of the bitcoin system, basically, a new platform that has all the history of the old platform but plays by new rules. Because it's built on bitcoin's history, users would automatically receive tokens on the bitcoin cash platform if they had tokens on bitcoin's platform.
There is a lot of volatility and uncertainty in cryptocurrencies right now, and Nvidia and AMD have been the only sure bets. Both companies produce graphics processing units that are used by cryptocurrency miners to speed up their machines' processing payments on the platforms. Faster processing speeds mean a bigger share of the payouts from the platform, so miners have been buying lots of the cards recently.
The graphics cards are in such high demand that they are often sold out, and miners are even renting entire jumbo jets in order to deliver their GPUs faster.
The demand for these graphics cards is not a steady driver of growth for Nvidia or AMD though. Both companies are receiving a short-term boost from increased demand, but the price of these cryptocurrencies are volatile and demand, which picked up rapidly, could be just as unpredictable.
On AMD's earnings call, CEO Lisa Su said that cryptocurrencies are not a "long term growth driver" for her company.
"Relative to cryptocurrency, we have seen some elevated demand," Su said on the earnings call. "But it's important to say we didn't have cryptocurrency in our forecast, and we're not looking at it as a long-term growth driver. But we'll certainly continue to watch the developments around the blockchain technologies as they go forward."
Nvidia is a bit more bullish on cryptocurrencies, according to a product page for unreleased GPUs, the company is working on graphics cards that are specifically designed for the demands of cryptocurrency mining. But according to Mitch Steves, an analyst at RBC, miners won't provide a long-term benefit to Nvidia either.
"As of July 30, we think demand for GPUs related to Ethereum mining will normalize and we won't see a large snap up in the network rate," Steves wrote in a note to clients. "To put it all together, our official estimate is ($500M of GPUs) with revenue of $175M for AMD and $75M for Nvidia (last 4 months), while the exact number is difficult to calculate."
Nvidia is betting on other areas like data center and artificial intelligence to be its main drivers of growth.
The winner of the civil war will be declared on August 1 at 8:20 am EST.
Nvidia reports earnings on August 10.