The share price of Advanced Micro Devices Inc. plummeted 11% this week on news of declining cryptocurrency mining-related sales. Markets responded negatively to the chipmaker's third-quarter earnings reports on Tuesday despite topping analysts expectations. The company warned it expects demand for its graphics processing units to flat line.
Since last year October, AMD stock price soared 118% on the back of a meteoric rise in appetite for its graphics processing units (GPUs). Much of this demand stemmed from the rise of cryptocurrencies like Bitcoin and Ethereum which in turn elevated orders for GPUs that double up as mining hardware.
But the appetite for AMD's production units seems to be fading, the fact that the company's CEO, Lisa Su, readily conceded. At Tuesday's earnings call, she admitted
"We're predicting that there will be some leveling-off of some of the cryptocurrency demand. As we look at it, it continues to be a factor, but we've seen restocking in the channels and stuff like that. So we're a little bit conservative on the cryptocurrency side of the equation."
Su's bleak forecast was enough to spark an 11% sell-off following her conference call despite an overall 26% increase in revenue. Investors enthusiasm for cryptocurrency mining priced into the stock since last year appears to have been over the top.
Part of the boost in overall revenue was down to a 24% contribution from AMD's Computing and graphics segments. However, because GPU cards can either be for PC gaming or mining activity, the company said quantifying the precise contribution by cryptocurrencies was a tall order.
Some analysts who closely track the chipmaker disagree. Mark Lipacus from Jefferies, says at least $75 million to $100 million of the firm's revenues emanated from cryptocurrency demand. He believes the company is playing its cards close to its chest and expects higher graphics card sales with increasing cryptocurrency prices.