Analyst: Bitmain's New Ethereum Mining Chip Could Spell A Little Bit Of Trouble For AMD And Nvidia

Bitmain officially announced its highly anticipated application-specific integrated circuit (ASIC) for cryptocurrency mining. The company said the new ASIC will hit the market in July, and it could be bad news for the GPU sales of Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA.

Why It's Important

The new ASIC will likely single handedly bring an end to the GPU supply shortage, according to Morgan Stanley analyst Joseph Moore.

“The superior economics [of the ASIC] is likely to drive down mining profits for graphics chips (which were already under pressure), and likely signal the end of the crypto graphics shortage by mid year, a tactical negative for AMD (and to a lesser extent NVDA), though both companies have other areas growing quickly,” Moore wrote in a note on Wednesday.

Earlier this week, Moore said falling Ethereum prices, which dipped to around $370 last week after peaking at nearly $1,300 in January, are already reducing GPU demand. The price of an AMD Radeon 580 is down from $530 to $399 on Amazon, while the price of a Nvidia GeForce 1060/6 GB is down from $500 to $399.

Moore said the new Bitmain ASIC will be able to generate roughly $6.26 per day in revenue from cryptocurrency mining compared to only about 83 cents per day for the R580 graphics card chip. The ASIC will be priced at about $800 and will be capable of a hash rate 7.5 times that of the leading graphics cards.

What's Next

In light of the new ASIC competition, Morgan Stanley says investors should be cautious when it comes to Nvidia and AMD shares.

Morgan Stanley has an Underweight rating and $8 price target for AMD, along with an Equal-Weight rating and $258 price target for Nvidia.

AMD was down 4 percent shortly after Wednesday's opening bell, while Nvidia was down about 3.7 percent.

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