RBC Capital’s Mitch Steves this morning reiterates an Outperform rating on shares of Nvidia (NVDA), after conducting a “thought experiment” to see how the company’s chips benefit from the increasing need to save power in computing.

Steves tested an Nvidia GPU from last year, the “GTX 1070,” up against Advanced Micro Devices’s (AMD) “Radeon 580,” a newer part, to show what he believes is an important advantage in performance.

For his test, Steves runs both chip technologies in computing the two big “crypto-currencies,” bitcoin and Ethereum, a more recent entry to the market.

This to Steves is a good way of testing the payoff for a unit of work on a GPU:

 In cryptocurrency mining the network rate changes the amount of coins to be acquired with the same mining power. In a Bitcoin world, the network rate is 128K times higher than Ethereum which means the amount of units mined or “top-line revenue” is lower for the same amount of effort. In an environment where competition for units increases (revenue) costs become more important as they remain fixed based on the amount of GPUs being used.

The small-scale experiment doesn’t reveal that much difference between the two, but “if we switch to building a full Data Center environment, electrical costs become increasingly more important (Bitcoin environment) and the older Nvidia GPUs outperform AMD over the course of a year.”

His conclusion is that “We think the power consumption aspect acts as another material reason for Nvidia to maintain its market share leadership position.”

Steves describes the thrust of what he’s up to:

 As a thought experiment we use cryptocurrencies (Bitcoin and Ethereum) to represent an increased need for power efficiency. Increasing workloads cause more demanding power consumption (data center vs. high performance desktop) which emphasizes the importance of long-term power efficiency. While small scale tasks such as mining Ethereum will decrease the importance of electrical costs, Data Center level workloads are less forgiving. Importantly, despite comparing an older Nvidia product (GTX 1070) to a newer AMD product (Radeon Rx 580) we found that Nvidia’s product allows for more performance when adjusted for electrical costs. Overall, while the focus has been around the Cuda software and higher performance of Nvidia chips (on a like for like basis), we think the power consumption aspect acts as another material reason for Nvidia to maintain its market share leadership position.

Steves offers the following infographic of the costs of mining currencies:

Nvidia stock today is up $1.25, or 0.9%, at $149.26.


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