Crypto Mining Driving Share Price Growth in GPU Manufacturers

Mining for cryptocurrencies is having a significant impact on the share price of graphics processing unit (GPU) manufacturers Nvidia and AMD, according to analysts on Wall Street.

As more companies recognize the opportunities in mining cryptocurrencies, this share price growth is only set to continue, according to analysis from Mark Lipacis of Jeffries, who highlighted the commercial symbiosis between graphics unit manufacturers and cryptocurrency miners.

Nvidia has enjoyed share price growth of over 180 percent on the year, with AMD up 112 percent on the same period, fueled in part by strong demand from cryptocurrency miners for their graphics cards. An essential component in mining blocks for currencies such as bitcoin and ether, this growth isn’t expected to halt any time soon.

According to Lipacis’ client note on stock performance, both AMD and Nvidia represent the market’s key growth companies over the last 12 months, with growth expected to continue for at least several months as these companies continue to reap the benefits of this new and growing use for their products.

“We think that the risk of a ‘crypto-driven’ inventory correction driving material downside is low in the near term ... Both AMD and NVDA have introduced ‘cryptospecific GPU (stock-keeping unit)’ that have a low risk of competing with core gaming GPUs in secondary markets.”

Both companies have been quick to respond to the surge in demand from the crypto-mining sector, introducing their own dedicated products aimed squarely at that market.

The energy-intensive mining process performs a critical role in recording blockchain transactions, and requires powerful graphics processing units to obtain new cryptocurrency blocks, the reward for miners engaged in supporting the integrity of the network.

While both companies are currently enjoying strong performance, Lipacis noted there remain some risks to the share price growth long term.

Not least, there is an expectation that the underlying price of graphics cards could fall, which despite strong demand could lead to share prices falling back.

But even in the event of a major market catastrophe, such as a total collapse in demand for GPUs, Lipacis expects only a muted impact on the bottom line, with AMD exposed to a potential three percent drop-off and Nvidia 10 percent in worst-case scenario projections.

Nonetheless, both companies are expected to continue to benefit from upwards price momentum for the foreseeable future, as the market for mining technologies continues to expand.