Ethereum Move Proof-of-Stake to Hurt GPU Demand But Nvidia Less Exposed - Morgan Stanley

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By Sam Boughedda

In a research note Monday, Morgan Stanley equity strategist Sheena Shah, writing about the crypto market, said GPU demand should slow as the second-largest crypto blockchain Ethereum plans to move from using the energy-intensive Proof-of-Work approach to the less energy-intensive Proof-of-Stake, but "NVIDIA (NASDAQ:NVDA) is less exposed to crypto mining demand vs. 2017-19 cycle."

Shah wrote that with crypto prices having fallen, mining is less profitable than a few months ago and if Ethereum moves to using Proof-of-Stake (PoS) it will eliminate the need for miners and thereby reduce demand for GPUs.

"Bitcoin and Ethereum currently require powerful computers for the mining process and consume a lot of energy which governments and regulators are increasingly concerned over. If Ethereum moves to using Proof-of-Stake (PoS) it will eliminate the need for miners (reducing demand for GPUs) and drastically reduce energy requirements," said Shah. "Cryptocurrency mining had a dramatic impact on the gaming graphics markets in the last 18 months, driving an estimated 14% of revenue in CY21 but also substantially contributing to a major graphics shortage which boosted overall mix and pricing."

The analyst added that analyzing the terahash contribution suggests total GPUs for crypto drove a significant amount of revenue last year, with roughly $600 million being "NVIDIA specialty "crypto mining processors," implying roughly $2bn."

"That has fallen to $400mm or so per quarter in 1H22. This compares to about $12bn of gaming GPU revenue for NVIDIA and $2bn for AMD (NASDAQ:AMD); it's very difficult to know how much revenue came from which vendor. But this would mean that crypto contributed roughly 14% to overall gaming GPU revenue last year."