Nvidia: Ethereum’s shift to proof-of-stake could reduce demand for GPUs

Ethereum’s next-generation iteration, known as Ethereum 2.0 or Eth2, has been cited as a potential threat to demand by Nvidia for its graphics card (GPU) products.

On Wednesday, Nvidia revealed its financial results for the first quarter of fiscal year 2022, reporting an 84 percent year-over-year jump in revenue — hitting $5.66 billion — as well as $2.76 billion for its gaming unit, a 106 year-over-year increase.

Nvidia said that it believes the $2.76 billion figure benefited by demand for Nvidia’s GPUs by cryptocurrency miners, but CFO Colette Kress indicated in a commentary release that the firm doesn’t know the full extent of the impact.

“Gaming revenue was up 106 percent from a year ago and up 11 percent sequentially, reflecting higher sales in GeForce GPUs, with both desktop and laptop setting records, as well as in game-console SOCs. We continued to benefit from strong sales of our GeForce RTXTM 30 Series based on the NVIDIA Ampere architecture. We believe Gaming also benefited from cryptocurrency mining demand, although it is hard to determine to what extent,” Kress noted. 

Longer-term, Nvidia indicated in its 10-Q filing with the Securities and Exchange Commission (SEC) that demand from the mining sector could fluctuate based on the state of the cryptocurrency market as well as “[c]hanges to cryptocurrency standards and processes including, but not limited to, the pending Ethereum 2.0 standard.”

As Nvidia noted:

“Demand and use of GPUs for cryptocurrency has fluctuated in the past and is likely to continue to change quickly. Volatility in the cryptocurrency market, including changes in the prices of cryptocurrencies, can impact demand for our products and our ability to estimate demand for our products. Changes to cryptocurrency standards and processes including, but not limited to, the pending Ethereum 2.0 standard may also create increased aftermarket resales of our GPUs and may reduce demand for our new GPUs. During the first quarter of fiscal year 2022, we believe Gaming benefited from cryptocurrency mining demand, although it is hard to determine to what extent.”

The reason behind that line of thinking is that unlike the current iteration of Ethereum, which uses the hardware-intensive proof-of-work validation approach, Eth2 uses proof-of-stake, which doesn’t require the use of GPUs or similar hardware. 

As shown in data collected by The Block Research, ETH miners generated more than $2 billion in revenue during May.

As noted previously, Nvidia has attempted to prevent some of its GPU products from being used to mine by throttling hash rate performance. At the same time, it moved a dedicated mining product to market. 

According to Kress, the so-called Cryptocurrency Mining Processors generated $155 million in revenue — roughly in line with an estimate produced in April. 

Source