According to analysts company Bernstein, it took Bitmain four years to achieve the success that its larger tech rival Nvidia took over two decades to realize. Another Bernstein data cited in CNBC reported that Bitmain who came to the scene in 2013, generated between $3 billion and $4 billion in operating profits in 2017. Meanwhile, California-based chipmaker Nvidia, boasts a market cap of $147 billion and generated an operating profit of $3 billion last year.
Bitcoin mining operations are fueled by computer networks that perform calculations and are compensated in bitcoin for the equations they solve. Bitmain gets their revenue from the combination of operating bitcoin mining pools and selling mining equipment.
Regarding Nvidia’s role to supply semiconductors to devices employed for bitcoin mining, the combined production is reflective of a bitcoin mining activity that has indicated no signs of slowing despite China’s efforts.
Bernstein’s profit assessments for Bitmain are based on operating margin and gross margin of 75% and 65%, respectively. Also, it requires a very strategic approach even though Bitmain benefits from the 2017 enormous rise in the bitcoin price. That’s how Bitmain was able to achieve such margins. Considering that production costs plateaued and bitcoin price soared, so too did Bitmain’s AntMiner S9.
According to Bernstein, Beijing-based Bitmain controls around 80% of “bitcoin miners & application specific integrated circuits”. The analyst company predicts that Bitmain’s dominance will continue this year, but it’s hard to predict beyond that given the volatility in the cryptocurrency market.
Moving Away From China
Bitmain uncovered an intelligent expansion into a jurisdiction for the marketplace when China began cracking down on cryptocurrencies. Meanwhile, Bitmain’s primary competitor, Nvidia is also benefiting from cryptocurrencies demand per the analysts’ report.
For instance, Bitcoin miners utilize the graphics chips made by AMD or Nvidia to fuel their operations. Although GPU usage for cryptocurrencies has been increasing, the gaming industry is still their main market.
Nvidia’s capital price has increased over the past few years alongside the demand for cryptocurrencies, though the firm has been secret about the percentage of its profits that arise from the marketplace. In the recent quarter, Nvidia executive reviewed that cryptocurrency revenue was higher on a constant basis.