AMD results due, awaiting clues as to impact of cryptomining on its business

Cryptomining has resulted in sales of nearly $800m of GPUs in 2017. AMD is keen to convince investors that its business growth isn’t depending on crypto and blockchain, though…

Chipmaker AMD, who has seen a boost in its graphics business courtesy of the growing demand for cryptocurrency mining, is playing down the impact of blockchain-related activities on its balance sheet.

Cards based on AMD’s graphics performance processors have increased in price as demand has soared, with currency miners looking to optimised their computing rigs for maximum profit. As such, AMD has seen a demand spike for its performance products, which in turn has led to warnings that if it all proves to be a bubble, it’s looking at a drop in revenues.

Now, though, AMD has tried to play down the impact of mining on its income. In a blog post on its site, it had already written that “as a reminder, on our Q4’17 earnings conference call we stated that the percentage of annual revenue related to Blockchain was approximately mid-single digit percentage in 2017”.

It also played up that fact that “we had significant growth in the GPU business outside of Blockchain in Q4’17 as we ramped our Radeon Vega products, our GPU compute products, and our Apple business”.

Nonetheless, AMD shares have tumbled over 20% in the past three months. All eyes, though, will be on its first quarter results, due today, to gauge just how vital crypto and blockchain is to AMD’s business…

Here’s our story from March 2nd.

The chip business of AMD has had a good year, off the back of the launch of its Ryzen processor range. But there’s also the continued demand too for its range of graphical processing unit (GPU) products, and it turns out that cryptocurrency has had a sizeable part to play in that over the past 12 months.

That’s because graphics cards utilising AMD’s technology have enjoyed a particular boom off the back of crypto mining, as performance PC enthusiasts have continued upgrading their PC hardware to optimise the mining of cryptocurrencies. Jon Peddie Research has released a report that suggests cryptocurrency miners bought $776m of add-in boards for their work in 2017, and AMD was the main beneficiary of that spending.

In fact, so notable has the benefit been to AMD’s business that in its latest annual filing, it’s warned that it may suffer consequences should the interest in cryptocurrency mining decline.

In its report, it notes that “we believe that the rise of cryptocurrency prices and introduction of new cryptocurrencies created a demand for our GPUs in 2017″.

It added that “the cryptocurrency market has existed for several years and their prices and popularity increased in 2017.  The mining operation of cryptocurrencies are typically performed using specifically designed application-specific integrated circuits (ASICs); however, the introduction of new cryptocurrencies (e.g. Ethereum) have made mining on GPUs more efficient, providing a higher rate of return for the end user”.

But then it added the note of caution, adding that “our GPU revenue has been driven in part due to an increased interest in cryptocurrency mining. The cryptocurrency market is unstable and demand could change quickly. For example, China and South Korea have recently instituted restrictions on cryptocurrency trading. If we are unable to manage the risks related to a decrease in the demand for cryptocurrency mining, our GPU business could be materially adversely affected”.

The full report can be read here.

AMD is not the only company in a similar position, with Nvidia also reported to have received a boost from cryptocurrency mining, and equally vulnerable to a drop in the market. Not that there’s any predicted (even as new Coins try and tempt people more through ICOs than mining). It’s just an indicator of the lucrative hardware backbone behind one part of the crypto market, but one that may yet be vulnerable to regulatory changes.

Image: BigStock