According to Morgan Stanley, a top Wall Street firm, AMD will have to deal with its graphics processors demand problem next year, as both cryptocurrency mining and gaming console will slowly decline, confirms CNBC.
Morgan Stanley reduced its rating for the tech giant’s shares to underweight from equal-weight, predicting such an issue for the multinational American company. Of course, this negative report meant a decrease of AMD’s shares by 9 percent.
Should AMD be concerned about the decrease?
Just last Wednesday, the stock declined 13.5 percent a day after it gave fourth-quarter profitability guidance below some Wall Street estimates. But Monday’s hit it was what took the stock into the red for 2017, with a drop of 4 percent.
In a note to clients on Monday, analyst Joseph Moore wrote that AMD’s “fundamental outlook is not quite as robust as microprocessor momentum has been slow to build, offset by cryptocurrency gains.” He also added that AMD’s graphics surge was boosted by the cryptocurrency market, but this will most likely decelerate next year.
AMD, among miners’ favorites
Graphics cards based on AMD’s and Nvidia’s chips are used by cryptocurrency miners to produce new coins. The digital currency market is one on fire lately, but Moore feels that it will slow down, dragging AMD towards the bottom. And that’s why he lowered his price target for the shares to $8 from $11, representing 32 percent downside from Friday’s close.
$250 million is the sum that experts see AMD losing next year from their graphics chips sales. “To be clear, we admire what the company has accomplished on a fraction of its competitors,” said the same Joseph Moore. Although Morgan Stanley’s view is not in AMD’s favor, the American company indeed managed to break away from its competitors, having its stock up 64 percent in the past 12 months through Friday compared with the S&P 500’s 21 percent gain