Morgan Stanley Sees Risk to AMD’s Gaming Business, Says NVIDIA Consensus ‘Too Cautious’
2022.07.18 22:42
Morgan Stanley Sees Risk to AMD’s Gaming Business, Says NVIDIA Consensus ‘Too Cautious’
By Sam Boughedda
In a note to investors on the chip market, Morgan Stanley analyst Joseph Moore said they are positive about the prospects for the CHIPS Act and it will be a notable positive driver, with over $50 billion in federal money subsidizing spending across multiple years.
“Further, the heavy subsidization of the Global Foundries fab in France – by our estimates roughly 50 cents on the dollar – demonstrates that this is a global phenomenon,” said Moore.
Focusing on Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nvidia Corporation (NASDAQ:NVDA), Moore explained that discussions with clients focused on themes such as how they are estimating the impact of crypto mining on the GPU market, what the current secondary market card pricing means for Nvidia and AMD, and how they expect the impact of the two prior dynamics show up in earnings reports.
“As we have written, we arrived at our estimates by analyzing the total hashing power that was added to the ethereum network in 2021, from the beginning of the year to the annual peak, estimating an average hashing power contribution per card, and then multiplying by the ASP of such cards, but only NVIDIA’s and AMD’s take, which is considerably lower than the final card price,” said Moore.
He added that the “math would then suggest total GPUs for crypto drove about $2.6mm of revenue last year; of that, roughly $600mm was the Nvidia specialty ‘crypto mining processors’, implying roughly $2bn for the gaming product in particular. This number peaked at about $1 bn in 4q, and declined from a run-rate perspective 50-60% through May, when we started to see the hash rate contracting.”
Morgan Stanley expects NVIDIA to have the more outsized exposure to the crypto market, given their higher overall market share in gaming GPU in general. He also said that most investors agree with their more positive view that “NVIDIA’s data center business will see less impact from cloud digestion next year. Shorter term, we think that consensus might actually be too cautious around the current quarter.”
For AMD, they see a risk to the gaming business but remain “enthused by the company’s market share gains in CPU, and believe the combined growth and profitability profiles of the data center and Xilinx (NASDAQ:XLNX) businesses mean existing estimates should be achievable even in a weak gaming GPU cycle.”
