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  • There's a certain kind of computer chip that has become

  • incredibly important to the modern world. The GPU short for

  • graphics processing unit. GPU is bring digital worlds to life. In

  • the last few years, they've become v computer chip of choice

  • among certain crypto miners. They're also becoming

  • increasingly more important and cutting edge fields like self

  • driving cars and supercomputing. But like every other kind of

  • computer chip and 2021 GPUs remain in short supply. The

  • current

  • state of the chip market in terms of gamer perception is

  • utter Bedlam. If you are interested in doing anything in

  • PC gaming, that is anywhere near cutting edge, you're either

  • trolling through as many eBay listings as possible, lining up

  • at retailers the instant they might have availability for a

  • new card, or giving up.

  • GPUs are specifically designed computer chips that process

  • complex calculations alongside a CPU or a central processing

  • unit. All computers have CPUs, more and more. They also now

  • have GPUs either to play games handle complex visual software,

  • or to conduct parallel processing.

  • Now, why did we make that shift? because historically,

  • computation used to be serial, that let's say I give you a

  • certain workload, and you were able to divide that workload

  • into smaller pieces. And a CPU would be able to go through each

  • of those many workloads serially. So as an example, if

  • there is a picture, and I asked you to find the shape of an

  • animal in the picture, I can bear it that picture into a

  • grid. And I can go through those grid points one by one, which is

  • serial processing, or do you know what I can do is I can look

  • at every grid point with its individual processor all at the

  • same time. That's parallel processing. The Covid

  • 19 pandemic wreaked havoc on the world supply chains,

  • semiconductors quickly became very hard to find. When COVID-19

  • first emerged, strict lockdowns caused demand to plummet across

  • entire industries. But when lockdowns lifted and vaccines

  • rolled out, demand came back in a big way helped, of course by

  • generous government stimulus programs. And since computer

  • chips and semiconductors are now used in virtually everything,

  • supply dried up as demand came roaring back. Now for GPUs

  • demand came from a few camps. You had your PC gamers, your

  • crypto miners and people who wanted to hoard graphic cards in

  • order to sell them later, GPUs became super hard to find retail

  • prices on the secondary market, they sold for several times

  • their MSRP.

  • Now, the tough part is that, you know, in semies, we are just

  • going through this tough period of supply shortages. So one way

  • or another, I think we would have gotten this issue whether

  • even if, and just crypto miners are exacerbating that problem

  • somewhat.

  • Historically, GPUs were used to power video game graphics from

  • the arcade rigs to the early home gaming consoles. And for

  • the most part, that's what they still do. The GPU business as we

  • know it, though, got started in the 1990s. Computer games were

  • advancing quickly and they needed more processing power.

  • Companies like 3d FX popped up to help PC gamers play the

  • latest games without having to buy entirely new computers. And

  • they did that by introducing video cards to help process

  • increasingly complex 3d graphics. In 1999, Nvidia

  • announced the GeForce 256 calling it the world's first GPU

  • that kicks off an arms race between Nvidia which ended up

  • buying 3d FX and a Canadian company called ATI which was

  • bought by Advanced Micro Devices in 2006. For $5.4 billion. That

  • arms race is still very much going on between Nvidia and AMD.

  • But yeah, I mean, like Nvidia and AMD are the two big retail

  • brands for gamers such that like they kind of divide themselves

  • into these tribal identities around like which brand of

  • chipmaker they support in video folks, LEED Green and the AMD

  • people are Team Red. Yeah, they really want to hold on to this

  • this core loyal customer base gamers.

  • GPU makers like Nvidia and AMD are known for making games look

  • more and more amazing. Each year. The companies hold flashy

  • events to launch new graphics cards. With the latest ray

  • tracing technologies. They sell GPUs to data center clients as

  • well. In fact Nvidia brought in about $2.4 billion last quarter

  • from its data center business a record number. Its gaming

  • business, though brought in $3.1 billion during the same quarter

  • also record At 5% higher than the year before, there's another

  • group of retail consumers who want the same GPUs as gamers,

  • crypto miners.

  • And if you go to a Best Buy, you cannot buy an ASIC. You cannot

  • buy, you know, programmable chip. So you can really buy a

  • graphics processor and you know, if you buy it and you're not

  • using it for ethereum a lot of the time, I mean, you can use it

  • for gaming also, the summary point is that right now GPUs are

  • offering that computation of flexibility and ease of

  • purchasing that matches well with where etereum is in its

  • lifecycle.

  • Covid also sparked a boom in gaming with everyone stuck

  • inside the supply chain crunch seen across all sorts of other

  • industries hate computer chips the hardest, and video remains

  • the leader and the GPU industry by a wide margin controlling

  • about 83% of the discrete GPU market and the most recent

  • quarter. AMD is market share rests in about 17% as of last

  • quarter, Nvidia needed to do something to ensure that gamers

  • had access to GPUs. First in early 2021 introduced hash

  • limiters to its latest line of graphics cards. crypto miners

  • quickly figured out a way to beat them.

  • Nvidia has essentially like just nuked its its own graphics cards

  • to try to weaken them in key ways to divide them between the

  • chips that are meant for the gamers and the chips that are

  • meant for the crypto miners. They are trying to keep this

  • core block of super dedicated customers happy. It's just like

  • the supply chain is so screwed up. Like none of this has worked

  • its way through the system yet to meet a demand from gamers for

  • the latest graphics cards.

  • The company also released what's called CMP chips or chips,

  • specifically designed for crypto mining to help ensure that GPU

  • supplies remain in stock for gamers sales for that chip pale

  • in comparison to gaming chips. And its most recent quarter and

  • video said CMP chips brought in $266 million in sales, which is

  • lower than the 400 million the company had predicted in May.

  • What's more in video CEO says the chip shortage will persist

  • into 2022.

  • They're kind of stuck in this very strange conundrum of having

  • a product that they cannot keep on store shelves, but also

  • having a reputation of game fans being furious about them not

  • being taken care of.

  • The Ethereum blockchain is supposed to undergo a massive

  • overhaul in 2022. Going from a proof of work protocol to proof

  • of stake. This has big implications for how ethereum

  • the world's second largest cryptocurrency gets mined, the

  • world's largest digital currency. Bitcoin has grown so

  • large in recent years that hardware companies now make

  • computer chips, specifically designed to mine Bitcoin.

  • They're called ASIC chips, which stands for application specific

  • integrated circuit.

  • But where we are today is that the ethereum still requires a

  • lot of complex calculations. But it is not at a point yet where

  • you can design those ASICs, right where the algorithms keep

  • on changing. So there is always that increasing complexity. And

  • to handle that increasing complexity, you need something

  • that can be programmed very quickly.

  • proof of work requires machines to complete increasingly complex

  • math equations to generate new coins. This requires more and

  • more computing power and requires more and more energy.

  • It's how Bitcoin gets mined and ether as well. The ethereum

  • community, though, plans to switch to a proof of stake model

  • that requires users to put up their existing cache of ether as

  • a way to verify transactions and create new coins that would

  • completely overhaul the way that ether gets mined today, and it

  • would cause demand for GPUs among ether miners to plummet.

  • The real interesting question to me is that if you are a miner,

  • and if you think that ethereum is indeed going to go to this

  • proof of stake, why are you still bidding up the price of

  • this card? Why, you know, 123 times above MSRP. So maybe that

  • market is implicitly trying to tell us that that don't be

  • fixated in terms of, Oh, this is Bitcoin, there's ethereum and

  • this is this coin or that coin, that people who are buying this,

  • maybe think that the need for complexity in this market will

  • never go away. So to them even paying up for this technology

  • today. It's still worth it

  • Nividia's doing great at selling out this very expensive thing.

  • But that doesn't mean that they're going to own an entire

  • market, an entire number of users, and they're interested in

  • things like cloud. They like Microsoft have a whole cloud

  • system and Google and Ubisoft and many other companies, even

  • Sony have these online streaming services where they have their

  • own server farms with their own giant graphics card slapped in

  • You just log in, and you use the internet's back and forth

  • latency to play the games you want. So there could be a future

  • in a few years where you're not hunting for a GPU, or a console

  • or a big box in your home, and you simply log in and pay per

  • month, and the idea of the millions and millions of people

  • who would pay per month and give you that recurring revenue.

  • That's, That, to me is arguably a more interesting future than

  • the big robust graphics card.

There's a certain kind of computer chip that has become

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How The GPU Chip Shortage Hit Gamers And Crypto Miners

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    moge0072008 posted on 2021/11/01