2 of the world's biggest chipmakers are sinking as cryptocurrencies get smoked

  • Nvidia and AMD are two of the largest producers of graphics processing unit cards for cryptocurrency mining.
  • Both stocks took a hit Friday morning after cryptocurrencies large and small slumped.

Shares of Nvidia and AMD, two of the world’s largest chipmakers whose businesses have recently been fuelled by supplying graphics cards for cryptocurrency mining, are falling Friday morning after almost every single cryptocurrency slumped. Some were down by as much as 35%.

NVDA was down 1.52% at $US192.92 a share, while AMD was lower by 4.65% at $US10.38.

Both companies have profited from the explosion in interest surrounding cryptocurrencies and the necessity of so-called mining, which was born alongside bitcoin in 2009.

Miners quickly figured out the type of maths required to mine digital coins was made faster by introducing graphics cards initially used to improve video game graphics. Nvidia, as well as rival AMD, has profited massively from the trend.

Some analysts have already argued that the two companies’ moat was shrinking as bitcoin and ethereum begin to slow their astronomical ascent, but an RBC Capital Markets analyst said last week that there’s still room to run on smaller cryptocurrencies that aren’t as large as the big three (bitcoin, ethereum and bitcoin cash).

Unfortunately, even smaller coins were getting smacked down on Friday – and things could really go downhill for Nvidia and AMD from here.

Ethereum, which has a market cap of $US60 billion according to coinmarketcap.com, is contemplating a shift to a “proof of stake” system instead of the industry-standard “proof of work.” This means payments on the Ethereum blockchain might soon happen via a sort of voting system rather than a race to find the answer to a complicated maths problem, which is the current verification method. That could decimate the impact a GPU has on the mining prices.

Still, Wall Street remains rather bullish on both stocks. Analysts surveyed by Bloomberg give NVDA and AMD prices targets of $US224 and $US14.60, respectively – both healthy premiums to where they are currently trading.

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