Today, Advanced Micro Devices (NYSE:AMD) is being pushed on a weird story. Basically, as this story goes, AMD is seeing demand for its GPUs due to them being more efficient than competing NVidia (NASDAQ:NVDA) GPUs to mine Litecoin, a digital currency similar to Bitcoin where to get new coins the users have to use computing power to solve hashing problems.
This seems a bogus reason. Why? Because GPUs have long been obsolesced and turned uneconomic for mining Bitcoin. The reason is that mining Bitcoin has evolved towards solutions made specifically for it, instead of general-purpose computing devices using CPUs or GPUs. First these solutions involved using FPGAs (Field-Programmable Gate Arrays), which are ICs that can be configured towards specific applications. Then, even FPGAs got surpassed, by solutions based on ASICs (Application Specific Integrated Circuits), which are ICs made to solve specific problems. Hence even more efficient than ICs which can be programmed to solve the same problems, since here the ICs will be hard-wired for a specific application and include no overhead beyond the necessary.
While Litecoin has probably not attracted ASIC players yet, it's sure to have attracted FPGA players since these can be fielded quickly. Hence, it makes little sense to think that mining Bitcoin or Litecoin could really lead to much-increased demand for less-efficient GPU solutions. Indeed, a quick search already shows this to be happening, with Crypto Industries announcing FPGA miners dedicated to Litecoin.
Today, Digitimes had news saying that TSMC saw its 28nm utilization rate drop due to a cutback of customer orders. What is relevant here, though, is that AMD was named as one of those customers cutting said orders:
Qualcomm has cut its 28nm chip orders to TSMC as the fabless firm is engaged in inventory adjustment, the sources indicated. AMD, another major 28nm chip customer of TSMC, has also slowed down its pace of orders due to a seasonal drop in chip demand for games consoles, the sources said.
This is strange and worrying, because the gaming consoles using AMD's chips are Xbox One and the Sony Playstation 4. Both were launched just last month, so it would seem strange for AMD to already be seeing a seasonal slowdown in chip demand. Usually, such a slowdown might hit after the Xmas quarter, but in this case, with the consoles being so new, seeing a slowdown is clearly worrying, both for AMD and Sony (for Microsoft it's less of a problem as Xbox is less relevant). I wonder about the veracity of this news, maybe the reason is that the new generation ended up not being a tremendous jump over the former 7-year old generation of consoles, as Grand Turismo 6 on Sony Playstation 3 shows. This effect ought to be smaller as newer games take greater advantage of the more powerful hardware, but short term it might be crimping sales.
AMD seems to be seeing a pump on somewhat unrealistic news of Litecoin-related GPU demand. These news seem unrealistic because much like it happened with Bitecoin, Litecoin mining ought to be overwhelmed by FPGA- and ASIC-based solutions, and it would take a lot of optimism to plow money into GPU-based mining solutions knowing that would be the short-term evolution.
Over time, AMD might have other reasons to warrant a long position, but this doesn't seem to be one of them.