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Chip Makers Aren’t Stacking Bets on Cryptocurrencies

Cryptocurrencies have been a winning bet this year, but the chip makers who play a key role in the market are still playing their hands very cautiously.

The exploding value of cryptocurrencies this year has created a strong incentive for “miners” who use high-end computers that match and update cryptocurrency transactions in return for rewards. Mining for many of the fastest-rising currencies, including ethereum, is powered by graphics processors from companies like Nvidia NVDA -0.32% and Advanced Micro Devices. These chips, also called GPUs, are the same type used in high-end gaming PCs.

Cryptocurrency mining seems to have created a decent market for both companies. Nvidia credits about $ 220 million in revenue over its last two quarters to crypto demand, which is a little less than 5% of the company’s total sales. AMD CEO Lisa Su estimates the market will account for a mid-single digit percentage of the company’s projected 23% growth this year, which suggests revenue around $ 50 million for the year.

But neither company wants to bake crypto into their outlooks, and with good reason. Cryptocurrencies are highly volatile. Changes to the underlying technology can sharply affect the economic value of mining. Joseph Moore of Morgan Stanley says an expected shift by ethereum in the next year or so will render GPU-based mining for the currency “obsolete.”

Still, there were 26 cryptocurrencies with total market values over $ 1 billion as of Thursday. Only bitcoin and ethereum were in that range a year ago. Mitch Steves of RBC Capital notes that several of those rising fast are mined with GPUs. Cryptocurrencies may be unpredictable, but they are likely here to stay. Which is ultimately good news for those with chips in the game.

Write to Dan Gallagher at Markets

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