Susquehanna Downgrades AMD on Bitmain Challenge

New York-based Susquehanna downgraded AMD and lowered its share price target, citing fierce competition from specialized mining companies like China-based Bitmain.

Global trading and tech company Susquehanna has lowered its rating for GPU maker AMD from neutral to negative, reducing its share price target from $13 to $7.50, which is about 29% below the Friday closing price. The main reason for the downgrade is strong competition from crypto mining equipment producer Bitmain. Susquehanna’s analysts have also cut their target price for Nvidia from $215 to $200.

The Wall Street company said the share price of AMD and Nvidia would fall given that specialized cryptocurrency mining chips will be in trend this year, with Bitmain leading the charge.

On Monday, Susquehanna analyst Christopher Rolland said in a note to clients:

“During our travels through Asia last week, we confirmed that Bitmain has already developed an ASIC [application-specific integrated circuit] for mining Ethereum, and is readying the supply chain for shipments in 2Q18. While Bitmain is likely to be the largest ASIC vendor (currently 70-80% of Bitcoin mining ASICs) and the first to market with this product, we have learned of at least three other companies working on Ethereum ASICs, all at various stages of development.”

Cryptocurrency miners apply graphics processing units (GPUs) from AMD and Nvidia to generate new coins. The mining process involves solving specific algorithms to create new blocks in the blockchain and get rewarded with new coins.

Bitmain is the market leader in the Bitcoin space, offering ASIC products that are more powerful than AMD’s or Nvidia’s GPUs.

Ethereum has been considered a better alternative for using GPUs instead of the expensive ASICs, but Rolland anticipates that Bitmain’s specialized devices for Ethereum mining will hit demand for GPUs this year. Thus, he downgraded AMD and lowered the share price target and also reduced the target price for Nvidia but left its rating at “neutral.” As Rolland put it:

“Nvidia has a stronger and more durable gaming franchise which would help it work through this potential Ethereum-related unwind.”

AMD share price ended the Monday session down 1.79%, while Nvidia added 4.94%.

Last year, Morgan Stanley downgraded AMD on concerns that crypto mining would “fade” in 2018, reducing demand for its GPUs.

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