Crypto Slump to Impact AMD Q4 Earnings
Market analysts are expecting that AMD’s (Advanced Micro Devices Inc.) fourth quarter earnings results will continue to be impacted by the cryptocurrency slump. AMD is expected to release its earnings report on Tuesday, January 29, after close of trading.
Crypto Hangover Continues
According to Susquehanna’s analyst Christopher Rolland, while AMD had managed market expectations quite well, the lowered retail prices for GPUs (Graphics Processing Units) would still impact its overall fourth quarter 2018 earnings.
GPUs have been widely used by cryptocurrency miners in their mining operations. With the boom towards the end of 2017 and the beginning of 2018, prices of GPUs shot up, with AMD’s Radeon RX580 GPU being sold for a whopping $550 in February of last year. However, that same GPU is now being sold for $180 – a massive 67% decline in its price.
According to Cowen’s analyst Matthew Ramsay, the third quarter of 2018 was messy for AMD, thanks to the fact that the demand for GPUs had plunged due to the massive slump in the cryptocurrency market. This led to the company taking on losses and having to slash prices dramatically for their inventory to be cleared.
Ramsay believes that those inventory issues will continue into the first quarter of 2019 and so his firm has given the chip maker a lowered forecast for its Q1 performance.
The Chief Executive Officer of AMD, Lisa Su stated that while their client and server processors saw significant increases in sales, their GPU sales were much lower in Q3.
Su added that while she was expecting GPU sales to add to their fourth quarter sales, those numbers would not be as significant. She also stated that she expected the company to take at least a couple of quarter to recover from the crypto slump and stabilize once again.
Not the Only One
Due to the decline in profitability in the cryptocurrency mining segment, all mining related equipment saw a massive plunge in prices. Sales related to crypto mining almost went down to zero.
And AMD was not the only chip company to be impacted by the slump in the cryptocurrency mining market.
Taiwan-based chip making major Nvidia also was impacted by the crypto winter. Its GPU sales dropped as dramatically as AMD’s and the company’s fourth quarter was nightmarish, with the company witnessing a massive sell-off of its shares, leading to a 64% drop in stock price. The company ended up becoming the worst performer on the S&P 500 Index.