Advanced Micro Devices Inc.(AMD) and NVIDIA Corp. (NVDA) shares have been surging as investors bet demand for its graphic chip cards used to mine for cryptocurrency will continue unabated.
But while the likes of Bitcoin? and other digital currencies have been seeing huge gains in their prices, prompting scores of people to get into mining the coins, which requires computers with high-end graphics processors, some are warning the party could soon be over, which will pressure shares of both semiconductor companies. The computer-created coins people mine can either be held or sold for a profit.
Miners vs. Gamers
According to a report in MarketWatch, the highly speculative cryptocurrency market has resulted in both companies' graphic cards being hard to come by. When they are available, they often sell for much higher than the manufacturer's suggested retail price. That demand has even prompted Pacific Crest Securities bear to turn bullish and upgrade its rating on NVIDIA to sector weight from underweight. “Meetings with desktop graphics card manufacturers indicated a sharp reversal in sales trends expected for the seasonally weaker 2Q, with surging demand from cryptocurrency miners in China and Eastern Europe," analyst Michael McConnell wrote in a research note to clients. "The sharp increase in demand from cryptocurrency miners has rapidly depleted excess channel inventory carried into the quarter."
But that wild demand also presents a lot of risk given that its only being driven by a speculative market. According to Marketwatch, there are just as many people who are unhappy with the cryptocurrency frenzy as there are who are making a profit from it That’s particularly true of PC gamers who have long been loyal customers to the chip companies. That segment of the market is getting increasingly frustrated when looking for graphic cards from AMD and NVIDIA to purchase. They are not only angry but are shifting their focus elsewhere, which could pressure sales in the future. What’s more, once the cryptocurrency bubble pops or people stop making huge profits, it could result in less demand for their cards, leaving them with excess inventory. Their components could eventually find their way to resale markets, reducing their value significantly. If it happens while the two are in the midst of launching new graphic cards, it could hurt sales as the slightly older hardware is selling for a bargain price, noted Marketwatch.
Source: Investopedia
But while the likes of Bitcoin? and other digital currencies have been seeing huge gains in their prices, prompting scores of people to get into mining the coins, which requires computers with high-end graphics processors, some are warning the party could soon be over, which will pressure shares of both semiconductor companies. The computer-created coins people mine can either be held or sold for a profit.
Miners vs. Gamers
According to a report in MarketWatch, the highly speculative cryptocurrency market has resulted in both companies' graphic cards being hard to come by. When they are available, they often sell for much higher than the manufacturer's suggested retail price. That demand has even prompted Pacific Crest Securities bear to turn bullish and upgrade its rating on NVIDIA to sector weight from underweight. “Meetings with desktop graphics card manufacturers indicated a sharp reversal in sales trends expected for the seasonally weaker 2Q, with surging demand from cryptocurrency miners in China and Eastern Europe," analyst Michael McConnell wrote in a research note to clients. "The sharp increase in demand from cryptocurrency miners has rapidly depleted excess channel inventory carried into the quarter."
But that wild demand also presents a lot of risk given that its only being driven by a speculative market. According to Marketwatch, there are just as many people who are unhappy with the cryptocurrency frenzy as there are who are making a profit from it That’s particularly true of PC gamers who have long been loyal customers to the chip companies. That segment of the market is getting increasingly frustrated when looking for graphic cards from AMD and NVIDIA to purchase. They are not only angry but are shifting their focus elsewhere, which could pressure sales in the future. What’s more, once the cryptocurrency bubble pops or people stop making huge profits, it could result in less demand for their cards, leaving them with excess inventory. Their components could eventually find their way to resale markets, reducing their value significantly. If it happens while the two are in the midst of launching new graphic cards, it could hurt sales as the slightly older hardware is selling for a bargain price, noted Marketwatch.
Source: Investopedia
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