Crypto Crash Cuts into Nvidia's Gaming Revenue: How Big of a Bite

Economic

Summary:

The crypto crash is sending shockwaves through the GPU market. Will Nvidia's gaming revenue suffer? Dive deep into the impact and how the company's future might look.

The recent cryptocurrency crash has sent shockwaves through the digital currency landscape. But its impact extends beyond just the value of Bitcoin and Ethereum. The ripple effects are being felt in the hardware market, particularly for companies like Nvidia, a leading manufacturer of graphics processing units (GPUs).

The Boom and Bust of Crypto Mining

GPUs are not just for gamers. Their ability to perform complex mathematical calculations makes them ideal for cryptocurrency mining, the process of creating new coins. During periods of high cryptocurrency prices, miners flock to purchase powerful GPUs, driving up demand and prices for these components. This phenomenon played out dramatically in 2017 and 2021, leading to significant shortages and inflated prices for Nvidia's GPUs.

However, the recent crypto crash has reversed this trend. As the value of cryptocurrencies plummeted, mining profitability significantly decreased. Miners, no longer able to justify the high cost of GPUs, are either holding off on purchases or looking to offload their existing hardware. This has led to a glut of used GPUs flooding the market, further dampening demand for new ones.

The Impact on Nvidia

For Nvidia, this translates to a potential decline in its gaming revenue. Here's a breakdown of the potential consequences:

Reduced Demand: With miners out of the picture, overall demand for high-end GPUs is likely to decrease. This could lead to lower sales figures for Nvidia's top-of-the-line graphics cards.

Inventory Adjustments: Nvidia may need to adjust its production volume and potentially face pressure to reduce prices on existing stock to remain competitive.

Uncertain Recovery: The timeframe for a full recovery in gaming-related GPU demand remains unclear. It depends heavily on the future trajectory of cryptocurrency prices and the profitability of mining.

A Look Back: Lessons from the Past

This situation isn't entirely new for Nvidia. A similar scenario unfolded in 2018, when a crypto crash led to a glut of used GPUs and a decline in Nvidia's gaming revenue. The company took several quarters to recover. This historical precedent suggests that Nvidia might face a similar period of adjustment in the aftermath of the recent crypto crash.

Beyond the Crash: A Diversified Future for Nvidia

However, Nvidia's story is not solely dependent on the whims of the cryptocurrency market. The company has taken steps to diversify its revenue streams:

Focus on Data Center Growth: Nvidia has seen significant growth in its data center business, where its GPUs are used for tasks like artificial intelligence and machine learning. This segment now surpasses gaming revenue, providing a buffer against fluctuations in the gaming market.

The Rise of Cloud Gaming: Cloud gaming services like Nvidia GeForce Now are gaining traction. These platforms rely on powerful remote servers equipped with Nvidia GPUs, potentially reducing the reliance on high-end personal gaming hardware.

Looking Ahead: A Cautious Optimism

While the crypto crash will undoubtedly impact Nvidia's gaming revenue in the short term, the company's diversified business model offers some protection. The long-term impact remains to be seen and depends on the overall health of the gaming industry and the future of cryptocurrency mining.

For investors, it's crucial to consider these factors and stay informed about developments in both the cryptocurrency and gaming markets to make informed decisions regarding Nvidia stock.

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Alex

Economic

Commodity

Australian LNG producers could be running into tough times as global demand for the energy source peaks and oversupply starts to hit world markets.

According to an IEEFA report, between 2024 and 2028 global LNG supply will increase by an unprecedented 40%.

This is due in part to increasing capacity additions from the US and Qatar, two nations that are able to produce gas at a much lower cost than Australia.

Concurrently, demand for LNG is starting to decline in mature markets. IEEFA predicts that European demand for LNG will peak in 2025, and then decline.

Japan’s LNG demand has decreased by 25% since 2014 and is expected to fall by a further 25% by 2030 as LNG is replaced with resurgent nuclear output and renewable energy. South Korea’s LNG imports fell by 5% last year and are expected to fall further by 2030.

Australian LNG producers could make up for this lost demand by exporting to emerging Asian markets. However, IEEFA points out that due to often high and volatile prices, and the associated fiscal challenges, the appetite of emerging Asian markets for Australian LNG is limited.

Many of the Australian producers currently sell their LNG through long-term contracts, but a large share of these will start expiring after 2030. They will therefore be increasingly exposed to low-cost competition.

As of July 2023, around 75% of Australian-produced LNG is exported, primarily to markets in Asia.

The energy industry also faces the additional problem of a possible large glut in global oil supplies. The International Energy Agency recently predicted that global oil capacity in 2030 will exceed demand by eight million barrels per day.

Most Australian LNG contracts have pricing directly linked to oil prices.

Amandine Denis-Ryan, CEO of the IEEFA’s Australia team and author of the report, said that the “double oil and LNG supply gluts are really a double whammy for the Australian LNG industry, which now faces an ever-gloomier future”.

Source：Offshore Technology

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Warren Takunda

Economic

The Pound to Franc exchange rate rallied half a per cent to hit 1.1380 after the SNB lowered the base rate to 1.25% from 1.50%, saying "underlying inflationary pressure had decreased again."

The Euro to Franc rose 0.40% to hit 0.9540, and the Dollar to Franc rose 0.76% to quote at 0.8906.

The currency reaction confirms that the majority of market participants were expecting the SNB to leave interest rates unchanged, given the recent improvement in domestic data.

"The SNB is doing the right thing," says Dr. Thomas Gitzel, Chief Economist at VP Bank. "If it had remained put, as the majority of economists expected, this could have given the impression that policymakers were unsure about the last interest rate move in March."

The SNB might have been pushed into this interest rate cut owing to the Franc's recent rally; after all, it is the best performer when screened over the past month, a development that penalises Switzerland's exporters.

Back in May, SNB President Thomas Jordan seemed to signal unease with the Franc's decline following the March interest rate cut. The currency has ultimately strengthened since then and Jordan's previously expressed fears will have faded as a result.

Swiss Franc Falls on Second SNB Interest Rate Cut, But Weakness Could be Short-lived_1

Above: GBP/CHF at 15-minute intervals.

A further 'dovish' development for the Franc came as the SNB lowered its inflation forecast profile, which means it is comfortable with the view that inflation will continue to decline, even as interest rates fall.

How far will the Franc fall? This will depend on how the market's expectation for further rate cuts evolves. If the market believes this is the final cut of the year, selling pressure might prove limited.

If upcoming developments suggest further cuts are warranted, selling pressures can extend.

"Looking ahead, we think that the SNB will not cut rates again this year as we are now no longer confident that underlying inflationary pressures are abating because labour compensation is growing at a strong rate and services inflation remains very sticky," says Adrian Prettejohn, Europe Economist at Capital Economics.

Kit Juckes, head of FX research at Société Générale, says Franc weakness might not be destinated to last and Jordan will likely "see EUR/CHF slip back down. There is too little growth and too much political uncertainty in Europe for the CHF to fall far."

Source: Poundsterlinglive

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FastBull Featured

Remarks of Officials

On June 18, local time, Alberto Musalem, President of the Federal Reserve Bank of St. Louis, spoke at the CFA Institute, sharing his views on monetary policy and the US economy. Key excerpts include:

Economic activity has continued to expand at a solid pace underpinned by robust demand, especially in services. However, April data, especially on real consumer spending and nominal retail sales, mostly underwhelmed, and the few May data reported to date have been mixed. May retail sales were weaker than expected, suggesting that aggregate demand is growing at a moderate pace thus far this quarter.

Overall, I expect aggregate consumption to moderate in coming quarters, without stalling, and then return to or slightly exceed trend by 2026.

The labor market has continued to rebalance. It no longer seems overheated but remains tight. I expect some further cooling in the coming months, as evidenced by the recent decline in job openings, the modest increase in new claims for unemployment insurance, and the uptick in the unemployment rate. However, the large and broad-based growth in payroll employment and the increase in average hourly earnings reported in the May establishment survey suggest demand for labor remains strong. Continued high employment and compensation growth, approximately in line with productivity growth, should moderate the impact of easing labor market conditions on aggregate demand.

There are potential early signs of continued progress on inflation. Favorable national reports on consumer and producer prices suggest the monthly reading for the personal consumption expenditures price index, or PCE price index, should show a welcome downshift of inflation in May. However, it takes more than one data point to establish a trend. Moreover, recent elevated readings on PCE inflation have been broad-based across expenditure categories of goods and services.

I also supported the Committee's statement that it "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." The current policy posture balances the risk of easing policy too early with the risk of easing policy too late. It allows the Committee to patiently observe economic developments going forward.

I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out (implying that there may only be one rate cut this year).

I am also attentive to alternative scenarios where inflation becomes stuck meaningfully above 2 percent or moves higher. Should evidence of alternative inflation scenarios begin to materialize, I would support an additional firming of monetary policy.

To be clear, I do not view the inflation "getting stuck" or "rising" as the most likely scenario.

Musalem's Speech

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Samantha Luan

Economic

Stocks

European stocks strengthened after the Swiss National Bank delivered an interest rate cut in a busy day for monetary policy officials in the region.

The Stoxx 600 rose 0.4% Thursday, with the technology, insurance and real estate sectors leading gains. US future contracts also strengthened, signaling fresh record-highs for this year’s tech-fueled rally when Wall Street reopens after a public holiday.

The dollar edged higher against a basket of currencies, while 10-year Treasury yields advanced three basis points.

Policymakers in Switzerland cut borrowing costs for a second time, saying that inflation pressure has decreased again compared to the previous quarter. The Swiss currency fell in response, easing around 0.4% versus the euro, and tumbling 0.5% against the dollar.

“The fact we are having interest rates coming down implies they feel confident enough that the inflation dynamic is coming down,” said Guy Miller, chief market strategist at Zurich Insurance. The move “bodes reasonably well for other central banks,” he said.

Later on Thursday, Norges Bank and the Bank of England are expected to keep their respective rates unchanged.

In France, the Treasury is preparing to sell as much as €10.5 billion ($11.3 billion) in bonds for the first time since President Emmanuel Macron shocked markets by calling a snap election. The auction will offer clues as to whether the rout has taken yields to levels high enough to entice buyers. European Stocks Gain After Swiss Interest Rate Cut: Markets Wrap_1

European Stocks Gain After Swiss Interest Rate Cut: Markets Wrap_1

A two-day rally in Asia paused with a gauge of technology firms in Hong Kong sliding. The Japanese yen extended its weakness against the dollar to a sixth session.

The offshore yuan slipped to its weakest level this year on signs that policymakers are loosening their grip on the currency. The People’s Bank of China set the yuan’s daily reference rate at its lowest since November.

Chinese bonds were in focus after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds on the secondary market. The country’s 10-year government bond futures rose to a record high.

Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate earnings, especially in the technology sector.

Questions are rising on what could derail the stock rally given “all is not so rosy under the hood, where index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It has simply been a tough trade to bet against AI in its various guises - so until we lose these behemoths then pullbacks at an index level will likely be shallow and well-supported.”

In commodities, oil edged higher ahead of the release of weekly inventory data from the US. Gold rose after closing the previous session little changed.

Source：Bloomberg

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Economic

Central Bank

Forex

Calmer week for the euro after French turmoil

European assets are having a better week following the market panic sparked by the rise of the far right across the continent in the European Parliament elections on June 9. But the biggest shockwave came from French President Emmanuelle Macron's decision to call a snap legislative election the following day, raising fears that Marine Le Pen's far-right National Rally party would repeat its success on a national level.

The threat of a far-right government in the Eurozone's second largest economy raised fears of another debt crisis in the bloc, or at the very least, some kind of a market fallout on the scale seen in the UK from Liz Truss' mini-budget. Investors' biggest worries from a Le Pen government are the party's protectionist policies and its calls for increased public spending.

French jitters ebb, for now

But after the panic-induced selloff in French stocks and bonds, as well as the euro, the National Rally appears to be backtracking on some of the party's more controversial policies. Moreover, Le Pen has vowed to work with Macron rather than force his resignation.

Euro On Firmer Footing Ahead of Flash PMIs as French Risks Subside _1

Subsequently, market jitters have calmed somewhat and the risk premium on French debt has also fallen slightly. The spread between French and German 10-year government bond yields spiked to the highest since 2012 as the French political drama unfolded, but for now, a major crisis appears to have been averted and the focus is once again on ECB rate cut expectations.

ECB rate cut expectations pared back

On its part, the European Central Bank steered clear of getting caught up in France's domestic politics, but there were subtle warnings that neither would it stand idle should widening yield spreads become problematic.

Meanwhile, ECB policymakers have been out and about since the June 6 policy decision when rates were slashed, casting doubt on the prospect of back-to-back rate cuts. Most seem to be in favour of one cut per quarter, with the markets pricing in somewhere between one and two additional 25-bps cuts for the remainder of the year.

Eurozone economy on the mend

How the economy performs over the coming months will be crucial as to how rate-cut expectations shape out. The Eurozone economy picked up some momentum in the first quarter of 2024 and the composite PMI climbed to the highest in a year in May. Euro On Firmer Footing Ahead of Flash PMIs as French Risks Subside _2

Euro On Firmer Footing Ahead of Flash PMIs as French Risks Subside _2

Forecasts point to a further improvement in June's flash estimates. The services PMI is expected at 53.5 versus 53.2 in May, and the manufacturing PMI is projected to come in at 47.9 from the prior 47.3. The composite PMI is expected to tick up to 52.5 in June.

Investors will also likely be scrutinizing the details of the PMI surveys, particularly on employment, amid still elevated wage growth, and on price pressures. With a follow-up rate cut in September only 60% priced in, a soft set of PMI numbers, or signs of a cooling off in inflation, would boost those odds, weighing on the euro.

Can the euro restore its uptrend?

The single currency recently slipped below its short-term ascending trendline against the US dollar, falling below its 50- and 200-day moving averages (MA) too. Further losses could lead to a re-test of the April low of $1.0599. Euro On Firmer Footing Ahead of Flash PMIs as French Risks Subside _3

Euro On Firmer Footing Ahead of Flash PMIs as French Risks Subside _3

However, if the PMIs show a strengthening recovery or an unfavourable trend in inflation, the euro could extend its latest rebound by climbing back above the 200-day MA, bringing into scope the June top of $1.0915.

In the event that the PMI data fails to shed some light on the ECB policy path, investors will turn their attention to the flash CPI readings due on July 2.

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Warren Takunda

Cryptocurrency

Bitcoin has around 10 days until United States macro conditions support a return to BTC price upside.

That is according to financial commentator Tedtalksmacro, who tracks the correlation between BTC price action and U.S. Federal Reserve liquidity.

BTC price action strictly correlated to Fed liquidity

Bitcoin may be down around 3.2% in June, but the tables may turn before the month is out.

Analyzing how Fed liquidity conditions impact BTC/USD, Tedtalksmacro revealed a close correlation, which has held for several months.

“The correlation between Bitcoin + Fed Liquidity never ceases to amaze me,” he wrote in accompanying commentary on X.

“Liquidity bottoms in the coming 10 days, then rips higher again... get ready.”

BTC/USD vs. Fed liquidity. Source: Tedtalksmacro

A chart from his proprietary macro data resource, Talking Macro, showed BTC price highs and lows syncing with local peaks and troughs in Fed liquidity.

Even Bitcoin’s latest all-time high of $73,800 in mid-March was accompanied by a liquidity spike.

Clarifying how liquidity is calculated, Tedtalksmacro confirmed that the figure is based on “a mixture of Fed assets, repo markets, treasury data.”

Bitcoin ETFs await U.S. wirehouse influx

Talking Macro referred to problematic short-term headwinds for Bitcoin, noting a new decline in inflows to the U.S. spot Bitcoin exchange-traded funds (ETFs).

After seeing their second-highest daily inflows on record in early June, the trend reversed, with the past four Wall Street trading days conversely seeing net outflows.

Data from monitoring resources, including United Kingdom-based investment firm Farside Investors put the four-day outflow tally at just over $700 million — still less than the June 4 $886 million inflow. Bitcoin Price Rebound May Hit in 10 Days as Fed Liquidity ‘Rips Higher'_2

Bitcoin Price Rebound May Hit in 10 Days as Fed Liquidity ‘Rips Higher'_2

Bitcoin ETF flows (screenshot). Source: Farside Investors

Anticipation continues to build for the third quarter and beyond when it comes to a new wave of institutional interest in Bitcoin, as U.S. wirehouses are predicted to gain access to spot ETF products.

As Cointelegraph reported, that event forms a key point on the radar for those eyeing Bitcoin’s continuing transformation into an institutional heavyweight investment class. Among them is Cathie Wood, CEO of asset manager ARK Invest, one of the spot ETF providers.

“No platform has approved Bitcoin yet, so all of this price action has happened before they approve it, and so we haven’t even begun,” she said in an interview in March about U.S. wirehouses.

Source: Cointelegraph

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Crypto Crash Cuts into Nvidia's Gaming Revenue: How Big of a Bite

The Boom and Bust of Crypto Mining

The Impact on Nvidia

A Look Back: Lessons from the Past

Beyond the Crash: A Diversified Future for Nvidia

Looking Ahead: A Cautious Optimism