Wall Street firm Susquehanna reduced the ratings for AMD from neutral to negative and lowered the price target for shares in Nvidia, citing impending competition from Bitmain Ethereum (ETH) mining ASICs.
Susquehanna analyst, Christopher Rolland said in a written note to clients that Bitmain will start shipping its ASIC chips from the second quarter of 2018.
“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,” he wrote on Monday.
“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.”
Currently, miners use graphics cards based on the chips manufactured by AMD and Nvidia to mine Ethereum however, they are soon going to be replaced by Bitmain’s specialized ETC ASICs.
Bitmain also has its own specialized ASIC chips which are used to mine Bitcoin and believed to do a better job than AMD and Nvidia chips. According to Bernstein, last year, the Chinese Bitcoin mining company Bitmain generated as much revenue as AMD and Nvidia did. Most of Bitmain’s revenue came from selling mining rigs that were powered by the company’s own chips.
Rolland believes that Bitmain’s ETC ASIC chips will negatively affect AMD and Nvidia as both of the companies’ graphics cards for Ethereum mining account for only 20 and 10 percent of their revenues.
Therefore the Wall Street analyst has reduced his price forecast for AMD shares from $13 to $7.50, at Friday’s market close. Rolland also lowered his price target for Nvidia shares from $215 to $200.
Rolland wrote that Nvidia’s neutral rating was reiterated as “Nvidia has a stronger and more durable gaming franchise which would help it work through this potential Ethereum-related unwind.”
AMD’s shares were down 3 percent on Monday while Nvidia’s shares inclined by 2 percent.