Abstract: I propose what exact mechanism of cause and effect resulted in high GPU prices and explain why it vanished in November 2021.
The facts are easy, GPUs were expensive and hard to come by. At the moment, availability has improved, but cards are still expensive.
The generally accepted short and easy explanation is often chip shortage due to pandemic. But is it?
TSMC publicly lists its capacity and there is no shortage there. There is no dip in production and with production lines being set up years in advance, we can assume everything is going as planned.
https://www.tsmc.com/english/dedicatedFoundry/manufacturing/fab_capacity
Could they sell more chips? Yes. But that only means TSMC misjudged the demand. The same can be said for Samsung, they show no signs of a shortage that comes from having to shut down production. The world has a healthy supply of 12nm I/O dies for AMD Ryzen, 12nm Nintendo Switch, 12nm chipsets for motherboards, 7nm consoles, 7nm CPU.
There are also reports of wafer production being up 40% year on year during the pandemic. Which is not to say that some chips may be in shorts supply, but those chips are on the low end more than they are on the high end. The bleeding edge 5nm and 7nm is certainly available to the degree that was planned. The automotive industry is producing on older processes (65nm), their problems are their own and cannot be used to explain GPU shortage. Why wast a wafer on some 65nm chips, when you can make ways more money feeding it into your 7nm fab? This is how chip shortage is an explanation for car manufacturers, but not the PC and smart phone industry.
Source on wafer production: https://www.techspot.com/news/88657-samsung-ahead-tsmc-world-leading-wafer-manufacturer.html
Moving on to AMD and Nvidia. Posting record quarter after record quarter, those two do not seem to have any shortage either. They are producing more GPUs than ever. The shortage is not a production shortage due to people falling ill and producing less. They can produce exactly what they ordered in advance, yet the demand eats it up anyway.
https://www.digitaltrends.com/computing/gpu-shipments-increased-by-25-percent-despite-shortage/
In fact, production is up for the entire PC industry. Again, this may contribute to a shortage of other industries willing to pay less, but computer parts themselves are fine.
https://www.statista.com/statistics/263393/global-pc-shipments-since-1st-quarter-2009-by-vendor/
If our instinctual explanations for the GPU shortage and prices fails, we need a new explanation. The gut reaction to that is cyrpto miners. But why blindly accept this explanation? More importantly, why crypto, why now crypto and for how long crypto? If you just dig the web on the surface level, the explanation is often the federal banks of the world printing money, people losing trust in cash and crypto coins being the new gold standard. Which is fine, but it still does not explain the timing. It does not explain the rise of crypto mining especially in east asia. It does not explains the dips and the recent downward trend.
So I dug deeper and found these two videos, which will set up the events of 2020:
https://www.youtube.com/watch?v=XNfDd-UcAxA
https://www.youtube.com/watch?v=ZmEvAk5LRko
short version: the Macau casino system provides a service to rich Chinese nationals by gaming the system to get money out of the country. This was going on for years. Until China announced is was going to do a crackdown in mid 2019.
https://www.bworldonline.com/china-to-crack-down-on-gambling-pogo-exploitation/
A crackdown China pushed to the next level in mid 2020.
https://www.reuters.com/article/us-china-gambling-idUSKCN25D2O7
If you put the first Youtube video I linked and this Reuters article together, you get the impression that fighting gambling is just the surface level explanation. What really went on there was a crackdown on people funneling their money out of the country with the help of shady casinos. This crackdown continues until today
https://www.reuters.com/article/us-china-gambling-idUSKCN25D2O7
But even with casinos out of the picture, the demand for somebody providing the service to get your money someplace else did not vanish. I propose, this role was taken over by proof-of-work crypto currencies. No casinos required. As China moved on Macau, Ethereum exploded in late 2020. Instead of the explanation of people suddenly rediscovering their love for crypto after the first bubble, this in my opinion represents an actual domino that is actually pushed by an event.
https://coinmarketcap.com/currencies/ethereum/
We know what happened next. Proof-of-work coins took off, mining got way more profitable. Suddenly mining was not just currency conversion in China at break even, it became profitable in the rest of the world as well. Prices and availability of GPUs were ruined for gamers.
We have a second indicator as to why China’s move on casinos was to blame, because China is not stupid. They realized what had happened and banned crypto trading and crypto mining.
Around the time China announced it, you can see a huge dip in Ethereum, showing how dependent the entire ETH system is on China. Soon enough though, Chinese farms moved to neighboring countries and ETH returned to the new normal of ruining GPU prices. Resulting in articles such as this one
But since November of 2021, we see crypto in decline, raising the question once more what has happened. In this post, I allege the crypto bubble was caused by people moving their shady money business from casinos to crypto. Is there a new way to do the same which is in the process of replacing crypto? Maybe it is called NFT.
https://trends.google.com/trends/explore?q=nft
Basically, as NFT is trending up on Google, crypto is trending down in price. Suggesting the people using crypto to move money around are in the process of moving away from crypto. Let’s be honest, for the person who would have previously used casinos and crypto, NFTs have all the advantages of crypto currencies , but neither you nor the person rendering that service of extracting your money from China needs to buy insane amounts of GPUs to power the underlying system.
As a bonus, if you find the exploit in the system to get money out of China by using NFTs, you also profit from the fact of China’s stance on NFTs being very lax at the moment
https://fortune.com/2022/01/14/china-nfts-cryptocurrency-bitcoin-blockchain-ban/
The timing of the rise of NFTs and the fall of Crypto seems way too convenient not to think that the people who caused the crypto bubble in late 2020 have found a new way to do what the bubble was really all about. Getting the money of rich Chinese people out of the country.
This might result in demand for GPUs and crypto coins to shift more drastically than suggested by other attempted explanations of the entire GPU prices phenomenon. Because most of the world did not know the exact reason as to why crypto exploded in price, they now misinterpret the fact why capital is moving away from crypto causing the price to drop. Alleging I am right and this isn't just tinfoil of course. But I hope I provided enough of an argument with links to lend this theory at least some credibility.
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