AMD Stock Outlook: Why Bitmain’s ASIC Miner Are Not A Threat To AMD

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Summary:

  • Ignore the rumor that China-based Bitmain’s ASIC Ether miners will affect GPU sales of AMD and Nvidia.
  • Bitmain now controls 50% of Bitcoin hash rate. It operates the two largest mining pools for Bitcoin.
  • The developers and current miners of ASIC-resistant Ether and Monero blockchain certainly do not want Bitmain to again get 50% or more of their cryptocurrency’s hash rate.
  • The core developers of GPU-based cryptocurrencies will likely continuously update their blockchain algorithm to disable highly-efficient ASIC hardware miners.
  • Consequently, Ethereum and Monero miners will remain dependent on Radeon and GeForce video cards.

The stock of Advanced Micro Devices (AMD) was recently downgraded because of Bitmain’s rumored upcoming Ether and Monero-capable ASIC (application-specific integrated circuit) miners. Susquehanna analyst Christopher Rolland said AMD’s revenue has 20% exposure to cryptocurrency-mining. Rolland argued that AMD is highly vulnerable to Bitmain’s new ASIC miners. AMD and Nvidia (NVDA) enjoyed strong sales of their video cards since Q2 2017 because of Ether miners.

My dissenting opinion is that ASIC miners do not threaten AMD and Nvidia GPU sales. Ethereum miners will continue to depend on the gaming GPUs (Graphics Processing Units) made by AMD and Nvidia. Bitmain’s new Ether/Monero ASIC miners will provoke the developers of current GPU-based cryptocurrencies to continuously update their blockchain’s network algorithm.

Monero’s core developers have officially announced they will issue bi-annual updates to its algorithm to render ASIC miners useless. Ethereum’s blockchain has already in-placed anti-ASIC defenses. Its algorithm requires miners to hash data from randomly selected block which makes ASIC hardware sub-optimal for Ethereum mining. Ethereum also has “poison-the-well” contracts. Conventional Ethereum miners can create contracts that will make them ASIC mining hardware rigs obsolete. They could consensually disable a specific mining hardware if it is causing a centralization in hash rate compute.

Why Bitmain Is Disliked By Cryptocurrency Developers

Post-Bitcoin cryptocurrency developers do not want Bitmain to again dominate the global hash rate power like it does now on Bitcoin. China-based Bitmain was only established in 2013. It initially started as an ASIC chip vendor for Bitcoin mining. However, it quickly became the world’s largest Bitcoin mining pool operator with around 50% of the total hash rate power. Bitmain owns AntPool and BTC.com. Bitmain is also a large investor in ViaBTC.

(Source: Wolverine Cryptotrading)

Cryptocurrency developers fear that giant mining pool operators like Bitmain can cheat and dictate the trading values of their blockchain-mined currencies. Ether, Monero and other GPU-based currencies were specifically created to be ASIC-resistant. Bitmain and other Ether-specific ASIC miner vendors will find it hard to find buyers if their products can be disabled every algorithm update.

Consequently, AMD (and Nvidia) will continue to enjoy robust sales to miners of Ether and other GPU-based cryptocurrencies. AMD and Nvidia’s quarterly revenue has surged because of the huge cryptocurrency demand for GPUs.

Conclusion

Bitmain is doing a marketing ploy to attract customers of its upcoming ASIC miners for Ether and Monero. It knows that Bitcoin mining is now very hard to do. Bitmain wants in on the surging potential of Ether, Monero and other new GPU-based cryptocurrencies.

Ethereum is now the second-most valuable cryptocurrency. Bitmain’s is eager to operate a mining pool for it. I expect Ethereum’s developers to update its algorithm to prevent this from happening.

(Source: Coinmarketcap.com)

I still rate AMD as a buy. AMD’s sales will not be adversely affected from a weakened demand from Ethereum miners.

Let us never forget that the PC gaming community is actually a bigger market for GPU products. According to Jon Peddie Research, only 3 million GPUs (worth $776 million) were sold to cryptocurrency miners in Q4 2017. The overall market for PC gaming hardware was already worth more than $30 billion in 2016.

Most of that $30 billion were from mid-range and high-end processors and gaming video cards.

(Source: Statista)

AMD’s new Ryzen CPUs and Vega GPUs will help it weather any decline in GPU demands from Ethereum miners. Intel (INTC) is now also a customer of Vega GPUs. Intel’s long-term purchasing power is potentially greater than the revenue from cryptocurrency miners.

Furthermore, the artificial intelligence network of I Know First still has a very bullish one-year algorithmic forecast for AMD. This stock’s market trend forecast score is above 100. I Know First also has a very high 0.8 predictability score – it means it has a long track record of accurate one-year forecasts for AMD’s stock.

Past I Know First Success With AMD

AMD Stock Analysis

On June 21, 2017, I Know First published a premium article saying that it’s a sell time for AMD’s stock . I Know First has been bearish on AMD’s stock on 1, 3 months and 1 year time horizon. Over the those few months and the following year, AMD’s share price of $12.64 at that time was predicted to fall. As seen with the relatively high predictability indicator, the algorithmic forecast predicted a strong chance of the stock dropping over these timeframes. From the below graph one can see that on 3 months horizon the I Know First algorithm successfully predicted the movement of the AMD stock price which is fell by 4.08% performing below the NASDAQ benchmark by some 7%.

(Source: Yahoo Finance)

This bearish forecast for AMD was sent to I Know First subscribers on  June 21, 2017.

To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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