UBS: AMD is more at risk from a crypto crash than Nvidia

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AMD

As the crypto craze reached its peak this winter, demand for high-powered graphics chips like those made by AMD and Nvidia went through the roof.

But as prices for bitcoin and ethereum have fallen from their astronomical highs, UBS is warning that AMD could be at more of a loss than its rival chipmaker Nvidia if the demand falls.

While both companies have roughly the same revenue exposure to crypto, “NVDA’s revenue includes its coin mining SKU so AMD would be net/net more exposed to a crypto-driven correction in the discrete GPU market,” the bank said in a note to clients Thursday initiating coverage of the chipmaker.

To be sure, though, UBS thinks there’s still plenty to be gained in the graphics card segment from gaming – even if there’s a crash in cryptocurrency markets more dramatic than the declines seen so far in 2018. Bitcoin, for instance, has already lost half its value since the beginning of the year.

“A crash in cryptocurrency mining, and a sudden sale of grey market graphics cards could lower average selling prices and volumes of new graphics cards for several quarters, but should not affect the long term secular growth in graphics sales volumes,” analyst Timothy Arcuri wrote in the note. “Even when demand likely declines later this year as ASICs grow, AMD has gap fillers.”

ASICs, short for application specific integrated chip systems, could decimate the boost AMD has gotten from crypto. Instead of needing a graphics card with a connected computer, the new rigs are designed specifically to mine cryptocurrencies straight out of the box.

UBS’ inaugural target price for AMD is $11, 10% above the stock’s $10 price Thursday afternoon.

Shares of AMD have declined 9% since the beginning of 2018.

AMD stock price

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Markets Insider