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Advanced Micro Devices (AMD) — the multinational semiconductor company — recently released its Q3 financial report that shed light on the falling demand for GPU miners for cryptocurrencies.

AMD and NVIDIA maintain a duopoly in the GPU market, and only Intel surpasses AMD in the CPU supply market. AMD subsequently had substantial exposure to the cryptocurrency mining market as a supplier of the GPU chips commonly used in proof of work consensus model cryptocurrencies.

Declining Mining Demand

The AMD report’s reference to blockchain-related GPU sales is not all that surprising considering the ongoing issues surrounding Bitcoin mining giant Bitmain and their struggles with surplus inventory and an extended bear market. AMD details the declining demand for blockchain-related GPU sales as:

“Blockchain-related GPU sales in the third quarter were negligible. In the third quarter of 2017, blockchain-related GPU sales were approximately high single digit percentage of total AMD revenue.”

AMD announced revenue of $1.65 billion for Q3 2018 and expects to bring in approximately $1.45 billion in revenue in Q4 2018. However, AMD stock fell by 25 percent in after-hours trading following the report’s release, as reported by The Block.

Blockchain-related GPU sales accounted for a higher percentage of revenue in Q4 2017 at the height of the ICO frenzy. According to AMD:

“For comparative purposes, Q4 2017 revenue was $1.34 billion, adjusted for the ASC 606 revenue accounting standard, and included blockchain-related GPU sales of approximately low double-digit percent of overall AMD revenue.”

Although AMD’s exposure to the cryptocurrency market has been reduced, GPU sales have fallen as a result of the decreasing demand for GPUs in the cryptocurrency market.

Mining Market Shift

It has become well-established that the height of the frenzy in the cryptocurrency markets towards the end of 2017 led to gross overestimations of future demand for mining hardware. Bitmain’s massive gamble on hardware led to more than $1 billion in hardware surplus, and the drop-off of ICO prevalence has seen demand for mining follow suit.

The realization that PoW consensus is only sustainable with more established network effects — and for cryptocurrencies that have sufficient hash power to mitigate attacks — has also led to a surge in attempts to implement other consensus models. This has led to a further reduction in mining demand as new systems seek more efficient protocols such as proof of stake (PoS) that do not require mining hardware.

The market for cryptocurrency mining is a new frontier and undoubtedly has some unique complexities that even a dominant market player like Bitmain could not foresee. AMD’s report highlights how demand for GPU mining has tapered off and it will be interesting to watch how the mining industry continues to evolve.

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