AMD Has More To Lose Than Nvidia Should Bitcoin Mining Hardware Sales Decline

The cryptocurrency craze has been a major tailwind for both Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA. However, should cryptocurrency lose favor among investors, one analyst says AMD may have much more to lose.

The Analyst

Morgan Stanley analyst Joseph Moore maintains an Underweight rating and $8 price target for AMD stock and an Equal-Weight rating and $222 target for Nvidia.

The Thesis

AMD and Nvidia have been two of the hottest stocks on Wall Street in recent years, and surprise GPU demand from cryptocurrency miners has been largely responsible. According to Moore, that demand boost was likely only temporary, and could drop off significantly in 2018.

Moore said that, contrary to popular belief, bitcoin is irrelevant to graphics vendors because it moved to application-specific integrated circuit chips several years ago. Instead, most graphics-based mining is being driven by bitcoin rival Ethereum at this point.

“We believe that total graphics sales for Ethereum mining in 2017 will be $800 mn or so, and will decline by 50% in 2018; we can validate the 2017 number by looking at the increased complexity of the algorithm,” Moore said.

AMD Risks

While Nvidia has clearly defined its exposure to the cryptocurrency market and has assured investors that its projections incorporate downside risks, Moore said AMD has been tight-lipped about its cryptocurrency risks.

Moore says Ethereum mining is down 80 percent in the past four months and that it will soon shift to a technology called the Casper “hard fork,” that will render current Ethereum mining hardware obsolete.

Unless demand for other currencies picks up, it could be bad news for investors.

Price Action

AMD stock traded lower by 2.5 percent on Monday, while Nvidia shares dipped 1.3 percent.

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