Cryptocurrencies have shed about two-thirds of their total market capitalization since reaching a high in November 2021, and even dominant virtual currencies like Bitcoin have seen prices plunge. The crash is being fueled by several factors driving investors away from riskier assets, including rising interest rates, the Russian invasion of Ukraine, and inflation. But the impact of plummeting crypto is not confined only to holders of digital tokens. As crypto prices have fallen, so too have the prices of hardware and other equipment commonly used in the digital currency industry for mining and other functions.
Two of the major players in the graphics card market, Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA), have seen graphics processing unit (GPU) prices fall well below the manufacturer’s suggested retail price (MSRP). As of a June 19 report by tech data analytics firm 3DCenter, AMD’s current-generation graphics cards, also called GPUs, sell for about 92% of MSRP. That’s a 10 percentage-point decline in under a month. NVIDIA’s comparable GPUs have also dropped, but at a slower rate.
It's important to note that while the stock prices of AMD and NVIDIA have fallen sharply from their highs, both stocks still have outperformed cryptocurrencies such as Bitcoin in the past year. (see table further below).
The recent fall in GPU prices may have been fueled, in part, by the cryptocurrency crash and its broad ripple effect on the industry. GPUs have been used in the process of mining virtual currency tokens and have been in short supply at times during the crypto boom. Demand for GPUs may fall if investors turn away from cryptocurrencies or if energy-conscious crypto developers increasingly seek more efficient ways of generating new tokens. Indeed, changes in cryptocurrency mining have already impacted the GPU market before.
A drop in the crypto industry does not necessarily mean that graphics card makers will be impacted equally going forward. As interest in GPUs for cryptocurrency mining wanes, customers seeking these products for other applications, including gaming, may drive demand instead. That may favor Nvidia's products. Some rankings have placed NVIDIA GPUs higher on best-seller lists for gaming compared with other makers.
AMD and NVIDIA have diverged in terms of stock performance as well. Share prices of both companies have dropped along with the price of Bitcoin since reaching highs in the fall of 2021. However, neither company has seen as sharp a drop-off in share price compared with the price of Bitcoin over the past year. As of June 23, the price of Bitcoin has dropped by about 38.7% in the last year, while AMD has posted 1-year trailing total returns of 0.2%. NVIDIA shares have provided 1-year trailing total returns of -14.6% during that period. Both stocks have outperformed not only Bitcoin but the broader market, as the S&P 500 has 1-year trailing total returns of -11.5% for the period.
As crypto prices have dropped due to economic turmoil, the prices of GPUs used to mine them have dropped in turn. This has hit the stocks of the GPU duopoly, Nvidia and AMD, which have fallen, but less so than Bitcoin has.
CNBC. "Bitcoin has lost more than 50% of its value this year. Here’s what you need to know."
New York Times. "Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic."
TechRadar. "Graphics card price drops are great news for AMD fans – but less so for Nvidia."
TradingView. "AMD, NVDA, and BTC Price Charts."
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