Digital Coin Euphoria Wipes Away Tech Selloff for Nvidia and AMDBy
Pacific Crest upgraded Nvidia and raised estimates for AMD
Analyst cited surging demand from cryptocurrency miners
The two-week selloff in tech shares that wiped hundreds of billions in value from the sector’s biggest names is over for two of the highest flying chipmakers.
Nvidia Corp. and Advanced Micro Devices Inc. have all but erased losses that began June 8, with each rallying at least 5 percent in the past two days, even as broader measures of tech shares remain more than 2 percent from recent highs.
Thank cryptocurrency miners for the latest round of bullishness, says Pacific Crest Securities analyst Michael McConnell. They’re buying up Nvidia and AMD graphics cards in an attempt to unlock the code to digital coins like ether and bitcoin.
“The sharp increase in demand from cryptocurrency miners has rapidly depleted excess channel inventory” for Nvidia and AMD graphics cards, the analyst wrote in a note to clients Tuesday. “Surging demand from cryptocurrency miners in China and Eastern Europe since early May” will boost quarterly unit sales by as much as 20 percent, the analyst predicted, a sharp turnaround from his prior forecast that saw at least a 10 percent contraction in sales.
McConnell joins a growing list who are considering the impact on chip sales from computer scientists mining for digital currencies. Earlier this month, Bank of America Corp. analyst Vivek Arya raised Nvidia’s price target to a Street-high of $185, citing the use of the semiconductor company’s graphics processing units (GPUs) for mining as part of his thesis. GPUs aren’t powerful enough yet for the complexity of mining bitcoin, but Nvidia and AMD are reportedly working on GPUs specifically for this.
The Pacific Crest analyst upgraded Nvidia to sector weight Tuesday, the equivalent of a hold, while raising quarterly estimates for AMD. Nvidia added 1.4 percent to $159.08 as of 2:10 p.m. in New York, within pennies of erasing a 6.5 percent slump since June 8, when it closed at an all-time high. It’s rallied nearly 50 percent this year. AMD pushed its two-day rally to 13 percent, enough to erase the effects of six-day rout.
Still, McConnell noted that the boost in demand from miners may not be sustainable, saying that “desktop graphics card manufacturers are skeptical,” in light of a similar surge in demand in 2013 during another period of bitcoin euphoria that had no long-term effect on chipmaker sales. Goldman Sachs Group Inc. analyst Toshiya Hari isn’t convinced either, and reiterated a sell rating on AMD earlier this month.