One of the largest computer chip manufacturers, AMD, is facing demand issues after users are no longer purchasing their graphics processors in an amount equalling earlier this years.
Morgan Stanley has reduced their rating for the company from equal-weigh to underweight, with a prediction that cryptocurrency mining and gaming demand will lower during the 2018 fiscal year.
After the report came out, AMD stock immediately dropped by almost 10%. The stock dropped over 13% last Wednesday in the third week of October after their profitability report came lower than expected.
Joseph Moore an analyst in the market recently stated that “AMD’s fundamental outlook is not quite as robust as microprocessor momentum has been slow to build, offset by cryptocurrency gains. We believe that AMD’d graphics surge has been caused by a sharp increase in sales of graphics chips to cryptocurrency miners. We expect this to meaningfully decelerate next year.”
A large amount of the industry on graphics processing chips is based on cryptocurrency mining. Miners in the cryptocurrency industry use the graphics cards to mine new coins with high computing power. With the price of digital currencies up this year, it seems like graphics processing units could turn around.
Moore further stated that “we expect cryptocurrency to gradually fade from here, consoles to decline, and graphics to be flattish. To be clear, we admire what the company has accomplished on a fraction of its competitors budgets in both microprocessors and graphics — our cautious view is based entirely on the current stock price, and the limited potential for upside in 2018 and beyond.”
With the price of AMD up 64% year-to-date, it does not appear to most to be slowing down any time soon, but only time will tell.