AMD has benefited significantly from the growth in cryptocurrencies. The hardware which is developed by AMD is widely used by the cryptocurrency miners. As a result, in 2017, it was able to gain significantly due to the increased amount of these devices. However, when you look at the current performance of cryptocurrencies, you will realize that year-to-date, they are down significantly. Most of the analysts think that the golden period for cryptocurrency mining devices is in the past. As a result, the earnings of AMD can actually take a hit due to the downturn in cryptocurrencies.
Stellar performance in the recent past:
If you look into the performance of the AMD Stock in the recent past, you will realize that it is been stellar. It has grown 30% in just the last 45 days. This is because of the increasing demand of GPU’s. However, many of the analysts are concerned about how the demand will pan out in the future. If cryptocurrencies do not move up again, the demand will continue to go on decreasing. As a result, the earnings of AMD will decrease as well. Moreover, the competition from the other players is also increasing significantly.
According to analyst at Bernstein, Stacy Rasgon, GP is designed by AMD has significantly benefited the cryptocurrency miners. However, they were specifically designed for gaming. According to her, if indeed there is a downturn in demand for cryptocurrency mining rigs, the price of the mining rigs will fall. This will decrease the price since there will be extra capacity in the market. As a result, AMD will not be able to maintain the same margins.
The CEO of AMD, Lisa Su also stated that in spite of the demand in the cryptocurrency, caution should be maintained. The demand can be volatile which will actually impact the earnings of AMD. Moreover, she stated that the cryptocurrency mining rigs form up to 10% of the quarterly revenue of the company. This is a clear indication that the demand of cryptocurrency mining rigs is increasing and is set to take significant place in the quarterly earnings of the company.
It remains to be seen what is the result when the demand finally tapers off.