AMD's cryptocurrency boost may be nearing its end

  • Cryptocurrencies have boosted demand for AMD’s graphics chips in the past.
  • The company warned that crypto-related demand may be flattening.
  • Some analysts on Wall Street are sceptical the company will be able to compete in the long term.

AMD has been basking in the meteoric rise of cryptocurrencies like bitcoin and ethereum. Demand for its graphics processing units has skyrocketed as cryptocurrency miners snap up the cards to speed up their mining operations.

But, the time for that boost may be nearing its end, the company warned.

“We [are] predicting that there will be some levelling-off of some of the cryptocurrency demand,” CEO Lisa Su said in the company’s earnings call on Tuesday. “As we look at it, it continues to be a factor, but we’ve seen restocking in the channels and stuff like that. So we’re being a little bit conservative on the cryptocurrency side of the equation.”

AMD released its third-quarter earnings report after Tuesday’s market close, and shares plummeted nearly 11% after the company said it expects its fourth-quarter sales to drop about 15% from the third quarter. This is, in part, because of a slowing demand for the company’s GPUs used to speed up some cryptocurrency mining operations.

The company said that it’s hard to exactly quantify the boost its gotten from cryptocurrencies, as miners use the same cards that are made for PC gaming. AMD’s computing and graphics segment reported a 24% quarter-over-quarter increase in revenue, it’s largest of the year.

Mark Lipacis, an analyst at Jefferies, said he thinks that cryptocurrency demand contributed about $US75 million to $US100 million in revenue during the third quarter. Lipacis is notably bullish on the future of cryptocurrencies for AMD. After the earnings report, Lipacis restated his “buy” rating said that as long as cryptocurrencies continue to become more valuable, AMD will see a boost in its graphics cards sales.

Rick Schafer, an analyst at Oppenheimer, is decidedly less bullish on AMD’s future. He said that cryptocurrencies were the biggest source of growth for the company and because AMD said it expects a slowdown in its crypto-related demand, the company’s medium to long-term outlook isn’t as strong as other analysts are predicting.

“We remain sceptical of AMD’s ability to deliver a profitable long-term business model as the second horse in the secularly declining PC market,” Schafer wrote in a note to clients. He sees Nvidia and Intel as better versions of AMD’s GPU and CPU segments, and rates AMD a Neutral.

It’s worth noting, that the company’s total revenue forecasts for 2017 and 2018 are each higher than the previous year, even as the company suggests a slowdown in cryptocurrency-related demand for its graphics cards.

AMD is up 14.5% this year, even after its post-earnings decline.

Read more about AMD’s earnings release here…

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