Pro discusses semiconductor stocks outlook post Ethereum Merge
- Richard Windsor, founder of Radio Free Mobile, looks at potential impact of Ethereum's merge on tech industry.
- Ethereum had over 1 million miners and mining equipment worth over $10 billion that are basically "obsolete."
- Companies like AMD and NVIDIA could see a sharp market downturn in late 2022 or early 2023.
Ethereum (ETH/USD), successfully hit the Merge earlier Thursday to mark one of the biggest events in crypto history since the launch of Bitcoin over a decade ago.
The switch from a proof-of-work (PoW) mechanism to a proof-of-stake (PoS) network mechanism comes with multiple benefits for the Ethereum network (Invezz analyst Dan Ashmore gives a great overview in this post-merge analysis).
But does the transition from mining to staking have any impact outside of miners who might have to find alternative PoW coins like Ethereum Classic or an ETHPOW fork?
According to one industry expert, the tech industry could be one those impacted by Ethereum’s historic milestone.
Pro says Ethereum’s merge will hit chip companiesCopy link to section
Richard Windsor, the founder of Radio Free Mobile, says yes and states that Ethereum ‘merge’ is likely to substantially hit tech companies, particularly semiconductor firms like Advanced Micro Devices (NASDAQ: AMD) and NVIDIA (NASDAQ: NVDA).
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And that could see see valuations sink, he told CNBC’s Tech Check in an interview on Thursday.
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Ethereum miners had over $10 billion worth of mining equipment – what happens to these mining equipment? As Windsor points out, all the mining rigs and graphics cards that were doing all the complex computational calculations on the network up to this morning are “no longer needed.”
“That equipment is all but obsolete and will need to be repurposed for other things,” he noted.
And the impact?
Well, companies like Bitmain that sell mining rigs “could potentially go out of business” given one of the largest PoW networks is ‘gone’.
Elsewhere, graphics card makers like AMD and NVIDIA are struggling with short term weakness as miners looking to recoup some profit from their GPUs flood the secondary market.
Semiconductors could see sharp downturn in 2023Copy link to section
On what the outlook is for semiconductors going forward given recent supply chain bottlenecks and geopolitical implications among other factors, Windsor says signs of a cycle top are there.
According to him, trouble for semiconductor companies is really down to what leading companies such as TCMS, Samsung and Intel are doing: they are spending tens of billions of dollars and US subsidy levels are skyrocketing.
“What this means is that people are building semiconductor companies for reasons other than ‘I need to sell more chips’. It’s more about national security, security of supply. And what that leads to is potentially an oversupply situation, which gives you the possibility of quite a sharp downward turn in semiconductors – particularly going into 2023.”