Analyst: Bitcoin Mining Will Mean Less For Semis In 2018, AMD Is More Exposed Than Nvidia

Cryptocurrency mining has played a large role in the huge runs by Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA in the past two years. AMD stock has surged 287.6 percent since the beginning of 2016, while Nvidia is up 542 percent in that time.

However, Wall Street analysts are warning investors the crypto gravy train may be coming to a stop in 2018, a prospect that could hurt AMD much more than Nvidia.

The Analyst

Mizuho analyst Vijay Rakesh maintains the following ratings and price targets:

• Buy rating and $17 price target for AMD.
• Buy rating and $225 price target for Nvidia.
• Buy rating and $47 price target for Intel Corporation INTC.

The Thesis

According to Rakesh, the increasing computing complexity of cryptocurrency mining makes the business less relevant for individual miners.

“While the Blockchain software technology is here to stay, with applications in crypto-currencies, smart contracts and multiple markets, we expect crypto-mining will be a much less meaningful market for AMD/NVDA in 2018 (~6-7% of revenues currently) underlining an increased need for AMD/NVDA to focus on core PC/NB/Data Center markets in 2018,” Rakesh said on Monday.

Rakesh is expecting GPU-based cryptocurrency mining to decline significantly in 2018, and he’s not the only one.

Earlier this month, Morgan Stanley analyst Joseph Moore said most of the remaining graphics-based mining is currently happening in Ethereum, not bitcoin. However, he sees Ethereum mining graphics sales declining by 50 percent next year.

According to Morgan Stanley, AMD has much more exposure to cryptocurrency mining than Nvidia does. Rakesh estimates AMD has $500 million per year of exposure, while Nvidia’s exposure was down to just about $70 million as of the most recent quarter.

Price Action

Nvidia has certainly dominated AMD in the market in 2017. Nvidia stock is up another 98.4 percent this year, while AMD shares are down 2.2 percent year-to-date.

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