NVDA, AMD Boomed Thanks To Crypto Mining, But What Happened After Ethereum's Big Move From Proof-Of-Work? One Stock Was A Clear Winner

Semiconductor companies NVIDIA Corp NVDA  and Advanced Micro Devices Inc AMD, known for their graphics processing units (GPUs), saw their stock prices benefiting from the boom in cryptocurrencies. 

What Happened: These GPUs, originally designed for high-end video game graphics, have now become essential for computationally intensive applications such as data centers, artificial intelligence, and the creation of crypto assets.

Cryptography and blockchain creation require substantial computational power, making GPUs an ideal choice for these tasks. In 2018, as cryptocurrency prices soared, miners rushed to purchase GPUs, driving up the stock prices of Nvidia and AMD. GPUs played a vital role in the creation and management of crypto assets, to the extent that Nvidia even introduced a dedicated lineup of chips specifically for crypto mining in early 2021.

The Merge and Proof-of-Stake Approach

The Ethereum Foundation on September 15, 2022, completed “The Merge” process, which means Ethereum was switched from a Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoW).

With this development, the validation of new transaction blocks no longer relies on hardware mining, making the millions of high-end graphics cards previously used for this purpose redundant. Consequently, a large number of these GPUs were expected to flood the used card market. 

However, since 2023, the AI industry experienced a remarkable upswing. With machine learning at the forefront, AI applications penetrated diverse sectors, capturing investors’ attention and fueling the sector’s success. 

According to PwC, the potential economic impact of AI is substantial, with an anticipated contribution of $15.7 trillion to the global economy by 2030. This projection encompasses a $6.6 trillion boost in productivity and a staggering $9.1 trillion surge in consumption.

Will The SEC Finally Approve Long-Awaited Bitcoin Spot ETF? Ask industry experts directly at Benzinga's Future of Digital Assets event happening in NYC on Nov. 14, 2023. Be a part of the discussions where you won't just be a passive spectator. Don't let this chance slip away – secure early bird discounted tickets now!

See More: A Stay At The Floating Palace From James Bond's ‘Octopussy

Examining the performance of both AMD and NVDA in the aftermath of “The Merge,” we delve into which of these stocks emerged as the stronger contender.

NVDA vs AMD: Price Performance Comparison

Performance-wise, both Nvidia (NVDA) and AMD have witnessed significant changes in their stock prices over the past year. 

As of September 15, 2022, NVDA’s stock price increased by 215.61% ($129.21 to $407.8), while AMD’s stock price rose by 28.49% ($76.66 to $98.5).

NVDA vs AMD: Returns Comparison

When it comes to returns,  a $1000 investment in NVDA would have resulted in a final value of $3156.08, whereas the same investment in AMD would have yielded $1284.89. 

Co-Movement of NVDA and AMD

Historically, NVDA and AMD have shared a reasonably high correlation in their stock price movements. The coefficient of determination (R2) between the two stocks is calculated to be 0.8464, suggesting a strong relationship between their price fluctuations.

Price Action: At the time of writing, ETH was trading at $1,785.941 up 0.66% in the last 24 hours, according to Benzinga Pro. During Tuesday’s session, AMD closed at $98.50, showing a positive gain of $2.32 (2.41%), while Nvidia ended at $407.80, recording a slight decrease of $3.81 (0.93%).

Image Source – Shutterstock

Read Next: Here’s How Much You Should Invest In Shiba Inu Today For A $1M Payday If SHIB Hits 1 Cent?