Warning about Cryptocurrency Sends AMD Shares Plummeting

A warning from Morgan Stanley about cryptocurrency didn’t bode well with AMD traders on Monday, as the shares of the stock tumbled.

Shares hit red territory for the year after the bearish note from the firm was revealed on Monday as well as a downgrade.

According to Morgan Stanley, cryptocurrency mining chip demand will be cut in half. The firm has slashed its rating on the graphic chips company from “equal-weight” to “underweight.” The firm also lowered its price target from $11 to $8.

Analysts wrote in a note, “We expect cryptocurrency to gradually fade from here, consoles to decline, and graphics to be flattish.”

Analyst Joseph Moore of Morgan Stanley wrote that the company’s “fundamental outlook is not quite as robust as microprocessor momentum has been slow to build, offset by cryptocurrency gains.”

He went on to write, “We believe that AMD’s graphics surge has been caused by a sharp increase in sales of graphics chips to cryptocurrency miners. We expect this to meaningfully decelerate next year.”

“We expect cryptocurrency to gradually fade from here, consoles to decline, and graphics to be flattish,” he wrote. “To be clear, we admire what the company has accomplished on a fraction of its competitors’ budgets in both microprocessors and graphics – our cautious view is based entirely on the current stock price, and the limited potential for upside in 2018 and beyond.”

It’s been a tough month for AMD, as shares also sank 13.5% last week after the company announced Q4 profitability guidance that came in below what analysts had been expecting.

With the 9% drop on Monday, shares are now down 4% for the year.

Disclaimer: We have no position in Advanced Micro Devices, Inc. (NASDAQ: AMD) and have not been compensated for this article.