Cryptocurrency Mining Is The Next Gold Rush, And AMD To Make Short-Term Gains Selling The 'Pickaxes'

Despite Advanced Micro Devices, Inc. AMD’s strong second-quarter earnings beat, Argus analyst Jim Kelleher isn’t feeling bullish, reiterating a Hold rating on the stock.

BMO and Citigroup also placed Market-Perform and Sell ratings on the company, respectively, following the earnings call.

On the call, CEO Lisa Su highlighted the company’s return to non-GAAP profitability in the Q2, calling it a key development and progress marker.

However, Kelleher believes investors have already more than priced in the progress on the top line, as well as expectations for future growth. Kelleher is waiting for a pullback before considering buying in — shares are up 32 percent this year.

The Crypto ‘Gold Rush’ May Not 'Pan Out' Long Term

AMD has gained a reputation recently for producing graphics cards particularly well-suited to cryptocurrency mining. Investors expect this still-emerging market to be a major driver of growth for the company.

Kelleher believes that right now, more money is being made “selling pickaxes to the miners than is being made from mining.” In other words, GPU sales are outpacing Bitcoin, Ethereum and other cryptocurrency growth.

While concluding that GPU development is a “real phenomenon,” Kelleher believes that artificial intelligence and advanced data centers will be major supplements to AMD’s core business rather than crypto mining.

Other concerns the analyst expressed were the long path ahead for AMD’s EPYC chips to take market share from Intel Corporation INTC’s Xeon and potential weakening in console gaming, given that a new Sony Corp (ADR) SNE PlayStation is unlikely to be released before 2019.

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