Nvidia: China Crypto-Currency Ban Only Fuels Their GPU Sales, Says RBC

A ban on crypto-currencies by China’s government on Thursday will likely drive up the “mining” of bitcoin and the like, writes RBC Capital analyst Mitch Steves, in a report to clients regarding Nvidia (NVDA) and Advanced Micro Devices (AMD), which makes tools for bitcoin discovery.

Banning the currencies only drives more use of the GPU chips sold by both companies in order to mine more currency, opines Steves.

The ban will likely increase the demand for crypto- currency-related GPUs. With the China ban, the only way to obtain crypto currencies mined with GPUs is to now mine them with computing power (or purchase them in person from a stranger). China is now banning VPNs and straight purchases (Fiat -> Crypto), which means the best way to obtain the currency without purchasing it is to mine it using GPUs (ASICs for Bitcoin). Net Net: as noted in several reports, while the price of the coin can help drive demand, the network rate is the leading indicator. Importantly, the network rate has gone up ~2TH/s in a single day (after China news), and we think individuals looking to obtain crypto currencies in China will now purchase more computing power give that it is the only legal way to do so.

Steves thinks “decentralized exchanges” for the currencies are going to take over next: Mothership, Airswap and EtherDelta are a few that come to mind that simply need to be scaled.

Steves thinks the current rate of crypto mining — “103 TH/S” — suggests Nvidia’s crypto-related sales could be $120 million this quarter, about 80% of what Nvidia enjoyed last quarter,

Steves, who has an Outperform rating on Nvidia stock, nevertheless reiterates his view that “AMD is still the best chip for crypto currency mining from a price to performance ratio.”

While the Vega product can be used for it, the cost-to-performance ratio does not make sense, and we think Vega Sales are going to pure gaming. Crypto Chips continue to surround the 580 and 470/480 for AMD.

Steves thinks the current rate of crypto mining — “103 TH/S” — suggests Nvidia’s crypto-related sales could be $120 million this quarter, about 80% of what Nvidia enjoyed last quarter,

Nvidia stock today closed up $10.71, over 6%, at $180.11, boosted by a bullish report from Evercore ISI’s C.J. Muse.

Bitcoin’s value today surged by some 16%, to a recent $3,672.94, after plunging yesterday on the China news.

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