Top Analyst Bullish on Advanced Micro Devices, Inc. (AMD) and NVIDIA Corporation (NVDA) Even as Boost from Crypto-Currency Set to Shrink Next Year

Mizuho's Vijay Rakesh believes it will become more important in 2018 for these semiconductor players to make waves in core PC/NB DT, and Data Center markets.


After hosting meetings with an expert in the crypto-currency field surveying the future of graphic processing units (GPUs), central processing units (CPUs), and semiconductors in crypto mining, top analyst Vijay Rakesh at Mizuho is out with a research note on two key chip giants: Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA).

Though the analyst continues to bet on AMD and Nvidia, Rakesh does not anticipate that crypto-mining will hold much weight to these semiconductor stocks by next year, finding that as computing gets more complex, this could make semis “less meaningful” come 2018. With exposure to crypto confronting a wall soon enough, Rakesh believes it matters all the more for both AMD as well as Nvidia to make meaningful moves in core PC/notebook (NB), Digital Transformation (DT), and Data Center markets next year.

Rakesh explains, “While the Blockchain software technology is here to stay, with applications in crypto-currencies, smart contracts and multiple markets, we expect crypto-mining will be a much less meaningful market for AMD/NVDA in 2018 (~6-7% of revenues currently) underlining an increased need for AMD/NVDA to focus on core PC/NB/Data Center markets in 2018.”

Glancing ahead, “AMD and NVDA have limited (and declining) exposure to crypto,” underscores the analyst, who concludes: “We believe AMD’s exposure to crypto-focused (non video or headless) GPUs is ~ $500M/year or a HSD % of revenue. For NVDA it was ~$70M last quarter and ~$150M for the JulyQ. Given it is extremely difficult to figure if a gaming GPU is also being used for crypto-mining, we believe exposure at AMD ~10% of revenue and for NVDA ~6% of revenue (Exhibit 3). No change to estimates. We believe it is increasingly important for AMD/NVDA to show traction in core PC/NB, DT, Gaming and Data Center markets in 2018.”

All the same, the analyst acknowledges the latest fever for Bitcoin and Ethereum pricing did offer an exciting short-term tailwind for these two tech companies. Even if 2018 is not a strong year for crypto-mining trends benefiting AMD and Nvidia, the analyst sees a long-term “positive” at play, especially coupled with attention to core PC/NB and data center markets.

As such, the analyst reiterates a Buy on AMD stock with a $17 price target, which represents a nearly 46% increase from where the stock is currently trading, and Rakesh likewise maintains a Buy on NVDA stock with a price target of $225, which implies a close to 5% upside from current levels.

Vijay Rakesh has a very good TipRanks score with a 77% success rate and a high ranking of #18 out of 4,724 analysts. Rakesh garners 30.9% in his annual returns. However, when recommending AMD, Rakesh forfeits 11.0% in average profits on the stock. When suggesting NVDA, Rakesh realizes 90.5%.

 

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