Concern About AMD's Dependence On Crypto Data Mining?

The fact that Advanced Micro Devices, Inc. (NASDAQ: AMD)’s quarterly beat was driven almost entirely by the sale of the data-mining graphics processing units for the Ethereum cryptocurrency should be a cause for concern among investors, Barclay analysts said Tuesday.

“This does not mean AMD is going to miss September guidance as GPUs are still widely sold out and there will be a restocking phase, but we believe estimates could be too high next year should this Ethereum tailwind dry up,” analysts Blayne Curtis and Christopher Hemmelgarn said in a note.

Analysts set a price target of $9 and rated the stock Underweight. AMD was trading largely unchanged at $13.35.

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Investors Should Place Little Value In Crypto-Driven Earnings Stream

“By our math, it is already unprofitable to purchase a GPU at retail price for Ethereum mining let alone the 1.5–2x they are selling for,” they added. “We lay out some Ethereum mining basics in the note, and we estimate a negative 12-month payback with the currency below $350 (or nearly $550 at current above retail GPU prices) and that likely only gets worse as the difficulty steps up ahead of the transition to Proof-of-Stake (eliminates mining).”

“Gaming could have contributed some of the upside, but we would note that except (for) the crypto market AMD has lost share in discrete graphics to NVIDIA Corporation (NASDAQ: NVDA) with Polaris and (AMD’s) Vega likely fares no better.”