AMD, NVIDIA at Risk on New Cryptocurrency Chip

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AMD, NVIDIA at Risk on New Cryptocurrency Chip

According to CNBC, shares of chipmakers Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA) will suffer a significant damage this year as new specialized digital currencymining processors from competitors are scheduled to arrive in 2018. (Also see: NVIDIA at Risk Due to Cryptomining Exposure: GS.)

Susquehanna’s Christopher Rollandwarnedon cautioned clients Wednesday Monday of coming competition from Chinese crypto-mining startup Bitmain, which has created its own application specific integrated circuit (ASIC), a graphics processor used to mine the digital token ethereum. While the price of cryptocurrencies has fallen from December highs, demand for the graphic cards that enable miners to produce bitcoin has increased, resulting in a chip scarcity and a price increase. According to Coinbase, the price of ethereum is $462.23 at 2:23UTC, down 65% from a peak of $1,338.67 per token hit late last year, and up over 800% in the most recent 12 months.

NewMining Chips Cutinto Revenues

The analyst believes that AMD, situated in Sunnyvale, California, will lose market share to Bitmain’s new product, as a recent trip to Asia verified that the business is preparing its supply chain for shipments in the second quarter of 2018. Rolland went on to say that AMD is especially vulnerable because of its reliance on GPU sales.

While Susquehanna believes Bitmain will be the largest ASIC vendor, accounting for 70% to 80% of bitcoin mining ASICs and being the first to market with the new ethereum product, the investment firm has learned of at least three other developers working on the new offering at various stages of development. Bitmain already leads the bitcoin mining ASIC industry, offering more efficient customized chips than its US-based rivals.

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“While this call is likely premature (due to the necessity for GPU channel replenishment), the growth of Ethereum mining ASICs has the potential to harm 20% of AMD’s overall business revenue,” Rolland stated. The analyst downgraded AMD from neutral to negative and decreased his price target to $7.50 from $13, anticipating the stock to tumble 28% over the next year. AMD was trading down approximately 0.6% at $10.38 on Tuesday morning, having returned 1% to shareholders year to date (YTD) and down 24.3% year to date.

Rolland thinks that ethereum mining-related sales contribute for around 10% of NVIDIA’s revenue. He did not lower his recommendation on NVDA shares, but he did lower his 12-month price objective from $215 to $200, representing a 20% drop from Tuesday morning. NVDA is up 1.5% at $248.23, up 28.3% year to date and a stunning 129% in the last year. See also: Bitcoin Will Become the World’s ‘Single Currency,’ According to Dorsey.)

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