Yesterday AMD’s stock took a very steep dive in value. This is following a report by Morgan Stanley which forecasts that cryptocurrency-fueled graphics shipments to decline by 50% next year (a $250 million decline in revenue). “We believe that AMD’s graphics surge has been caused by a sharp increase in sales of graphics chips to cryptocurrency miners. We expect this to meaningfully decelerate next year,” Morgan Stanley analyst Joseph Moore said. Another report expects the demand for video game consoles to decline by 5.5% in 2018. These two factors led Moore to lower his price targer for AMD shares to $8 from $11, a 32% decline from Friday’s close.
Morgan Stanley reduced its rating on AMD shares from equal-weight to underweight, which reduced confidence in the market and triggered a sell-off. Now AMD stock fluctuations are nothing new, the company’s stock has been very volatile in recent times, especially when compared to Intel and NVIDIA.
“We expect cryptocurrency to gradually fade from here, consoles to decline, and graphics to be flattish,” Moore wrote. “To be clear, we admire what the company has accomplished on a fraction of its competitors’ budgets in both microprocessors and graphics – our cautious view is based entirely on the current stock price, and the limited potential for upside in 2018 and beyond.”