Since hitting a high in November 2021, cryptocurrencies have lost over two-thirds of their entire market value, and even prominent virtual currencies like Bitcoin have seen prices fall. Several factors are driving investors away from riskier assets, including increasing interest rates, Russia's invasion of Ukraine, and inflation.
However, the impact of falling crypto is not limited to digital token holders. As cryptocurrency values have dropped, so have the costs of gear and other equipment typically utilized in the digital currency business for mining and other purposes.
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| AMD and NVIDIA may face difficulties as a result of the cryptocurrency crash |
Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA), two of the market's key participants, have witnessed graphics processing unit (GPU) costs fall significantly below the manufacturer's suggested retail price (MSRP). According to a June 19 analysis by the tech data analytics firm 3DCenter, AMD's current-generation graphics cards, often known as GPUs, retail for around 92% of the MSRP. That's a ten-point drop in less than a month. NVIDIA's equivalent GPUs have similarly reduced in price, but more slowly.
While AMD and NVIDIA stock prices have fallen significantly from their highs, both equities have beaten cryptocurrencies such as Bitcoin in the previous year. (See the table below).
Crypto Crash and Price Drop
The Bitcoin meltdown and its extensive industry-wide ripple effect may have contributed to the recent decline in GPU pricing. GPUs were employed in the mining of virtual currency tokens and were in short supply at points during the crypto boom. GPU demand may reduce if investors abandon cryptocurrency or if energy-conscious crypto developers explore more efficient ways to generate new coins. Indeed, developments in cryptocurrency mining have previously had an influence on the GPU market.
A downturn in the crypto business does not always imply that graphics card manufacturers will be equally hurt in the future. As demand for GPUs for bitcoin mining declines, buyers wanting these goods for other uses, such as gaming, may fuel demand. This may benefit Nvidia's goods. NVIDIA GPUs have been ranked higher on best-seller lists for gaming than other manufacturers in several rankings.
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| AMD and NVIDIA may face difficulties as a result of the cryptocurrency crash |
Performance of AMD and NVIDIA Stocks
In terms of stock performance, AMD and NVIDIA have also varied. Since reaching all-time highs in the fall of 2021, the share prices of both firms have fallen in lockstep with the price of Bitcoin. However, neither company's share price has fallen as precipitously as Bitcoin's during the last year. As of June 23, the price of Bitcoin had fallen by around 38.7% in the previous year, while AMD had a 1-year trailing total return of 0.2%. During that time, NVIDIA shares had 1-year trailing total returns of -14.6%. Both stocks have beaten not just Bitcoin but also the larger market since the S& 500 has a 1-year trailing total return of -11.5% during that time.
- As cryptocurrency prices have fallen owing to economic uncertainty, so have the prices of GPUs required to mine them. This has impacted the GPU duopoly's stocks, Nvidia and AMD, which have plummeted, although not as much as Bitcoin.
