Considered the world’s most actively used blockchain network, ether ETH/USD successfully transitioned from a mining- and energy-intensive Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) model that replaces miners with validators.
This move, dubbed The Merge, has been touted as improving Ethereum’s scalability, reducing energy requirements, and making the entire ecosystem more secure.
However, the elimination of the need to mine Ethereum will undoubtedly impact global demand for graphics processing units (GPU) and raise doubts about the future growth potential of chipmakers such as e.g. B. let arise NVIDIA Corporation NVDA, Advanced Micro Devices Inc. AMD and other.
A look at Nvidia’s quarterly results to understand the revenue share of GPUs in the overall business paints a less extreme picture than one might think.
Also Read: Ethereum Whale Abruptly Moves Above $145M in ETH: What Does It Mean for the Crypto?
ETH Upgrade Impacts NVIDIA Earnings: Lian
Provides a viewpoint on how the Ethereum transition will impact NVIDIA and other chipmakers, thought leaders, and bestselling authors Andy Lian says, “The merger will completely eliminate the need for miners currently securing the Ethereum network. You will replace them with validators. This upgrade would result in a large revenue hit for NVIDIA, whose shares are down nearly 20% sequentially, coupled with a slowdown in its gaming business and weakness in global markets.”
The impact of moving to POS would be reduced if the forked POW chains can keep their demand high, receive support from big miners, and are backed by strong communities who believe POW is the core value.
“If done right, with the backing of companies like NVIDIA, this market push will likely put these publicly traded chipmakers in a much better position,” Lian adds.
As the world leader in the discrete graphics business, NVIDIA’s graphics business accounts for 58% of the company’s revenue and 62% of its operating income, according to Investopedia.
These include GeForce GPUs, game streaming service GeForce NOW, and solutions for gaming platforms from NVIDIA.
GPU market with healthy growth
Despite the fact that GeForce GPU sales will be impacted by the drop in GPU demand due to Ethereum’s design change, analysts expect the overall GPU market to grow over the next five years due to strong demand from the gaming industry healthy growth rates will be recorded.
Of concern, however, is the loss of pricing power that companies like NVIDIA have enjoyed while semiconductor chip shortages persisted.
As demand pressures and pricing challenges mount, chipmakers like NVIDIA must aggressively focus on other industries to maintain profit margins.
Based on this feeling Raj KaporFounder and CEO of India Blockchain Alliance says that Ethereum is not the only coin mining decently on a graphics card and that Beam and Ravencoin are actually similarly profitable at this point and even if ETH mining stops, these always would go further.
According to experts, after The Merge, crypto miners will look elsewhere for mining opportunities as long as there are other coins to reward them for their efforts.
“It’s also possible that combined with the major crypto asset crash of 2022, some miners may decide to go out of business altogether. Some might even try to create their own fork version of Ethereum, one that requires mining and no rules. We would likely see increased availability of used GPUs mined to bits as a result of the second-biggest crypto moving away from mining,” says Kapoor.
He adds that with ETH moving to PoS long in the offing, most miners will have alternative money-making opportunities planned out in advance.
Once the glut of GPUs on the used market stops, GPU demand would go back to previous levels unless there is another factor reducing overall demand.
As the increasing use of computers for entertainment and work purposes is a trend that will continue, all forces will eventually balance out.
Companies like NVIDIA that are involved in manufacturing and selling GPUs are already bundling them with other products and exploring other lines of business to supplement their profits, he said.
While the near-term impact of Ethereum’s move to a PoS model will hurt sales for NVIDIA and other chipmakers, the overall growth story for GPUs and related services appears intact.
As these companies expand their range of products and services into areas such as artificial intelligence (AI), their dependence on the crypto world will eventually diminish and be replaced by Web3-focused consumer products in the near future.
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