Mercury Data Offers Insight Into Advanced Micro Devices (AMD) and Nvidia (NVDA); Analyst Weighs in on the Stocks

Morgan Stanley analyst Joseph Moore is out today with a research note on shares of Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), following recent Mercury data on graphics for the second-quarter. Most notably, the data reveals that cryptocurrency will fall to effectively zero in the third-quarter, and points to softness in the overall market.

Moore commented, “We continue to see a correction in the market as shortages ease, though we are optimistic that NVIDIA can grow through it with the new product launch; we remain more cautious on AMD, where the bar has gone much higher as the stock has gone vertical, and we expect weaker graphics to offset much of the server ramp for the next 5-6 quarters, keeping numbers at around consensus. With the launch of Nvidia’s Turing Gaming GPUs with ray tracing capability (Turing Gaming GPUs Launch, clarifyingnear term outlook) and competition from AMD at least an year away, we expect Nvidia to gain back most of 700 bp of unit share that AMD picked up over 2016/17 driven by launch of the company’s Polaris line up and crypto mining demand.”

“Mercury estimates that AMD’s GPU revenues were up 130% y/y in 2q, higher than our model, which to us certainly represents a risk, particularly given AMD’s higher crypto exposure,and NVIDIA’s new products shippingnext month. While AMD should have offsets from the server ramp that is being met with great investor enthusiasm, we do think it’s important to consider both factors,” the analyst continued.

Net net, for Moore, NVDA’s risk/reward is the better deal at the end of the day, leaving him less than confident on AMD. The analyst reiterates a bullish stance on NVDA shares with an Outperform rating and a $273 price target, while keeping a bearish view on AMD with an Underweight rating and an $11 price target, which implies over 50% downside. (To watch Moore’s track record, click here)


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