+ 2.69
+ 1.88%

Morgan Stanley Sees Ethereum's Strength Benefiting AMD, Nvidia

January 23, 2018 10:01 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

Forget about bitcoin. For Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA) investors, the cryptocurrency story is all about Ethereum.

The Analyst

Morgan Stanley analyst Joseph Moore reiterated an Underperform rating and $8 price target for AMD and an Equal-Weight rating and $222 target for Nvidia. Moore raised its Q4 EPS estimates for AMD and Nvidia to 9 cents and $1.25, respectively.

The Thesis

Ethereum’s price surge in recent months extend the mining opportunity for AMD and Nvidia, according to Moore.

Back in November, Moore said that, contrary to popular belief, bitcoin is irrelevant to graphics vendors because it moved to application-specific integrated circuit chips several years ago. Instead, most graphics-based mining is being driven by bitcoin rival Ethereum at this point.

At the time, Moore predicted Ethereum-related graphics sales would decline by 50 percent in 2018, but the cryptocurrency’s subsequent price surge from $293 to near $1,000 has changed the economics for miners.

“This has created a situation where the payback on new mining rigs has declined back to 57 days from ~6 months in October, which has created a substantial demand for Ethereum mining hardware and as a result AMD and NVDA GPUs,” Moore says.

Despite the fact the Q4 sales may be boosted by unexpected mining demand, Moore says the market will likely recognize that this phenomenon was only temporary.

For AMD, Moore says the recent Spectre and Meltdown security patches negatively impacted Intel Corporation (NASDAQ:INTC) CPUs more than AMD CPUs, but the issue likely won’t drive more business to AMD.

For Nvidia, cryptocurrency is just one of many growth drivers, including Volta, cloud, and Nintendo Co., Ltd (ADR) (OTC:NTDOY) Switch, that will allow Nvidia to continue its pattern of earnings beats and guidance raises.

Price Action

AMD and Nvidia are both off to a hot start to 2018. AMD is up 24.8 percent in January, and Nvidia is up 21.8 percent.

Related Links:

18 Stocks And ETFs To Watch In 2018

Bank Of America On AMD, Nvidia, And Intel's 'Processor-Gate'

For the latest in financial news, exclusive stories, memes follow Benzinga on Twitter, Facebook & Instagram. For the best interviews, stock market talk & videos, subscribe to our YouTube channel.

Related Articles

What 4 Nvidia Analysts Think About Its Q1 Print

NVIDIA Corporation (NASDAQ: NVDA) reported late Wednesday forecast-beating first-quarter results and issued above-consensus revenue guidance for the second quarter. read more

4 Intel Analysts On What New CEO Means For Chipmaker's Market Share, Turnaround

Intel Corporation (NASDAQ: INTC) announced a new CEO Wednesday, sending the chipmaker's shares higher by about 7%. read more

Bitcoin Bull Mark Yusko Calls The Cryptocurrency 'An Asset Most People Don't Understand'

Mark Yusko, CEO and CIO of Morgan Creek Capital Management and Morgan Creek Digital, and notorious bitcoin bull discussed his outlook for cryptocurrencies during an appearance on Benzinga’s PreMarket Prep show this week. read more

AMD Analysts Bet On Continuing Momentum Amid Tailwinds, Execution, Intel Missteps

Advanced Micro Devices, Inc. (NASDAQ: AMD) shares are trading in record territory after the chipmaker reported stellar quarterly results. read more