While Bitcoin and Ethereum prices collapse, this isn’t as terrible for chip giants Nvidia Corp (NASDAQ:$NVDA) and Advanced Micro Devices Inc. (NASDAQ:$AMD) as one might have thought.
Since Bitcoin’s rally in June, the cryptocurrency company has shed nearly a third of its value, thus pushing into bear market territory. As of Tuesday’s afternoon trading session, Bitcoins were trading at nearly $2,373 a piece, which, according to coindesk.com, is a drop of more than 20% from the all-time high of $2,954 that it reached on June 11. Meanwhile, Ether, an alternative cryptocurrency, was trading at $194 each on Tuesday, having fallen more than 50% since it reached an all-time high of over $400 on June 13.
While the volatility doesn’t help cryptocurrency investors, it doesn’t necessarily doom Nvidia and Advanced Micro Devices.
For starters, neither company manufactures chips that are used to mine Bitcoins, instead, both companies desktop graphics chips are used to mine Ethereum. And while the price of Ether has dropped drastically, analysts believe that there’s still a healthy demand for both companies GPUs. If the price of Ether continues to fall, it will become less economical for people to invest in the sector, however, at the current price levels, people are still buying mining GPUs. “People are still mining and that’s all that really matters if you’re Nvidia or AMD because you’re still selling GPUs,” said Mitch Steves, an analyst at RBC Capital Markets.
According to Steves, so far this year, roughly $600 million has been spent on chips for mining Ethereum, with about $400 million of that stemming from the last three-and-a-half months. The Ether rally that took place in June is likely priced into the chip companies Q2 expectations. After that, it’s likely that there will still be demand, but it won’t be anywhere near as significant as last month; even more so if the price of Ether continues to decline.
“My long-term outlook is a bit mixed,” Steves said. “If the price collapses, there’s no market…but I don’t want to [disregard the market] because it could very well sustain.” He added, “That’s why I flagged it as more of a quarter move.”
On Tuesday’s afternoon trading session, Nvidia shares increased 0.6% to $154.75. Additionally, AMD’s stock was increasing 0.5% to $13.89.
Featured Image: depositphotos/herminutomo