Will Advanced Micro Devices, Inc. (NASDAQ:AMD) Benefit from Crypto Currencies?

October 05, 2017, 10:42 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Advanced Micro Devices, Inc. (NASDAQ:AMD) is currently a market leader in the crypto currency market as it provides graphics processing units (GPUs) for use by commercial miners. AMD recent earnings reports indicate that revenues from the sale of GPUs for crypto currency mining contributed positively to AMD’s overall revenues.

However, the company announced that it would not shift its focus from its primary gaming market where the demand for its superior GPUs is on the rise. The company currently faces stiff competition in this market from Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA).

AMD’s CFO, Devinder Kumar, was quoted during a recent conference saying that the current crypto currency market is more mature than the 2015 market, which was largely focused on the consumer segment. In his view, the crypto currency market is here to stay and the company expects to continue servicing the commercial side of the current market by developing GPUs for commercial miners.

The main risk associated with the crypto currency market is that if the market experiences a downturn, commercial miners might decide to sell their GPUs, which would flood the market, and might even affect the company’s gaming division.

The company also has other opportunities given that it also provides GPUs for e-commerce retailers including Alibaba Group Holding Ltd (NYSE:BABA) and Baidu Inc (ADR) (NASDAQ:BIDU), who use the company’s GPUs for their cloud services. Amazon.com, Inc. (NASDAQ:AMZN) recently joined the other ecommerce giants as it switched to using AMD’s GPUs due to its graphics capabilities and its cloud computing functions.

Amazon decided to use the AMD FirePro S7150x2 server GPUs due to their graphic capabilities as the company aims to provide graphic design services through its cloud computing services offered to AWS customers. Given that this is a nascent industry, AMD has an opportunity to outdo its competitors in this segment.

There are also recent rumors indicating that AMD might be in the process of inking a deal with Tesla to collaborate on developing its own AI chip for driverless cars. If the rumors are true, AMD will have a significant opportunity to outdo one of its main competitors, Nvidia.

These rumors are yet to be confirmed, but the question remains whether AMD is a good stock to buy at its current valuation.

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