MIZUHO: AMD and Nvidia's crypto boom is officially over (NVDA, AMD)
Thomson Reuters
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Nvidia and AMD have enjoyed strong demand for their chips that could be ending soon.
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The companies will have to focus on other areas of their businesses to continue to do well in the future.
As bitcoin crashes through multiple $1,000 milestones, it looks like the crypto boost chip makers AMD and Nvidia have enjoyed is finally coming to an end.
"While the Blockchain software technology is here to stay ... we expect crypto-mining will be a much less meaningful market for AMD/NVDA in 2018," Vijay Rakesh, an analyst at Mizuho Securities said in a note to clients.
Both Nvidia and AMD have enjoyed increased demand for their graphics processing unit chips thanks to their abilities to speed up some cryptocurrency mining. But, as the power required to mine bitcoin remains out of reach for individual miners, and ethereum looks to move to a different payment verification system in the next six months, it looks like that demand will be much lower than current levels.
When bitcoin first started, individuals known as miners would lend computing power to bitcoin's blockchain network to help verify payments and were rewarded with small payments in bitcoin for their services. These miners soon figured out that GPUs from AMD and Nvidia were well suited to the type of math used to verify payments and bought them in droves.
As bitcoin, and other cryptocurrencies, exploded in price and popularity, it looked as if AMD and Nvidia's share prices would mirror bitcoin's rise. Both companies have said that cryptocurrency miners have made it hard for retailers to keep their products in stock, and the graphics card business has been booming because of it.
The companies approached the crypto market a bit differently, though. AMD has said previously that it appreciated the crypto boost, but has not focused on addressing it directly because it doesn't see crypto mining as "long-term growth driver." Nvidia has had the opposite reaction to the boom, saying it will stay very close to the market and react as needed.
Now, Rakesh thinks that both companies should move on.
"We believe it is increasingly important for AMD/NVDA to show traction in core PC/NB, DT, Gaming and Data Center markets in 2018," Rakesh wrote.
Rakesh reiterated his buy rating for both companies. He has a price target of $225 for Nvidia and a $17 price target for AMD.
AMD is down 1.46% this year, while Nvidia is up 106.71%.