As investors fear a decline in cryptocurrency due to news of a crackdown in China last week, with the government seeking to stop the unauthorized trading of all digital currencies, a handful of semiconductor manufactures have seen their shares drop. I
n response to the decline, a team of analysts on the Street tells clients not to worry about growth prospects for chipmakers NVIDIA Corp. (NVDA) and Advanced Micro Devices Inc. (AMD), whose graphic cards are used by cryptocurrency miners to “mine” new coins which are then sold or held for future appreciation.
Among the S&P 500’s Top Gainers
“We think that the risk of a ‘crypto-driven’ inventory correction driving material downside is low in the near term,” wrote Jefferies semiconductor analyst Mark Lipacis in research note Monday. The shift to mining-specific products could insulate graphics-card makers from a potential demand downturn in China, suggests the analyst, adding that demand for graphic processing units (GPUs) used in cryptocurrency mining is likely to “remain healthy in 3Q.” (See also: Bitcoin to Surge 80% to $5,000, Ethereum to Double: Analyst.)
The investment bank reiterated buy ratings on shares of both NVDA and AMD, who have seen their shares skyrocket 178% and 109% respectively over the 12-month period ending Tuesday afternoon, versus the S&P 500’s 15.5% gain over the same period. The recent rally makes the semiconductor stocks No. 1 and 2 in the benchmark index. Lipacis has a $180 price target for NVIDIA, reflecting a 7.5% upside, and a $19 price target on AMD shares, indicating a 5.3% upside.
„We actually believe that the technology they are based on, called Blockchain, which supports secure accounting of distributed ledgers, has applications in financial services beyond cryptocurrencies. We expect demand for Blockchain GPUs (including for cryptocurrencies) to continue to grow and become an important driver for GPU growth, even if with some degree of volatility,“ wrote Lipacis. (See also: China Halts All Cryptocurrency Exchanges to Curb ‚Risks‘.)