Cryptocurrency mining impacts AMD stock, Nvidia overestimates GPU demand

Demand from cryptocurrency companies has indirectly impacted the fortunes of GPU makers Advanced Micro Devices (AMD) and Nvidia, with the former’s stock price rising 30% in May 2018 alone.

Since 2017, speculative cryptocurrency adopters have begun buying up GPU cards in large quantities to build powerful mining rigs. Although this move has boosted AMD's profits and product demand, analysts are concerned that its stock price will immediately fall if GPU mining proves to be unprofitable or ceases to exist in the near future.

On June 20, Bernstein analyst Stacy Rasgon said AMD’s popular Vega GPU disappointed investors until cryptocurrency enthusiasts linked it to the product.

AMD confirmed earlier that crypto miners generate 10% of the company’s total revenue, adding that a “modest decline” is expected in the third quarter of 2018, CCN reported.

Morgan Stanley analyst Joseph Moore echoed Larsen's thoughts and remains concerned about the company's exposure to cryptocurrencies, arguing that the cryptocurrency industry "offsets the slow and steady progress in the microprocessor market" but ultimately "raises the bar for these companies to perform when cryptocurrency momentum fades."

According to a June 20 report from GadgetNow, Nvidia CEO Jensen Huang announced that the company will “not launch any new GPUs for a very long time” after the company overestimated demand from cryptocurrency miners.

Nvidia is currently facing excess inventory of its flagship 10-series cards, with its Asian OEM partners set to return 300,000 GPUs to the US chipmaker.

A Taiwanese OEM partner noted: This is very noteworthy news, as Nvidia typically exerts great influence over its partners and can be very ruthless in allocating new GPUs if a partner goes back on its word. The fact that this partner returned these GPUs speaks volumes about the current supply status.

AMD had $1.65 billion in revenue in the first quarter of 2018, 10% of which came from sales of GPUs for mining, CCN reported on May 11. Nvidia, on the other hand, had $3.21 billion in revenue, with $289 million (9% of total revenue) coming from sales to miners.