With the Byzantium upgrade on Oct. 17, the analyst expects profitability to be reset to mid-September levels of $20-$35 average profit per card per month. The improvement in profit, according to the analyst, is a function of the average block time being cut from five Ethers to three Ethers.
The profitability will decline only toward the end of 2018, extending mining demand well into next year, the analyst added.
The analyst also said that the GPU market is still in shortage but would recover into the end of the year.
"The Crypto tailwind is hard to quantify but likely 2* the $170-$180M AMD/NVDA identified in June with some gaming card manufacturers seeing 50-70% of current demand from mining," Barclays said.
AMD's GPU Business Challenged
The firm noted that AMD's GPU business is challenged outside of mining, with its GPU business not seeing any material share gains. Also, the firm noted that Polaris in gaming, according to third-party data, and AMD's next-generation Vega cards are more expensive than Nvidia's 1080Ti despite the similar die size and more expensive memory.
Because of lagging performance, the firm said AMD is forced to price its product closer to the older 1070/1080 yielding potentially dilutive gross margins. With Volta launching, the firm expects the demand for older mid-tier RX 400/500 cards to fade into next year.
To reflect better near-term demand, the firm raised its 2017 and 2018 estimates for AMD by $108 million and $135 million, respectively. The firm said its price target for AMD goes to $10, as it does not see the company's upcoming earnings as a positive catalyst. Also, the firm said long term, it remains cautious as share gains are not material enough to justify the current stock price.
Volta And Crypto Tailwind Boost For Nvidia
Barclays expects Nvidia's Volta-based client GPUs to launch in early 2018, and it is seen as an improvement over the Pascal models. The firm noted that the Pascal model's performance with AMD's newest Vega GPUs is competitive.
Although gaming units were down year over year in 2017, Barclays expects Volta drive better ASPs, while also offering better mining price/performance. The firm is of the view the Volta adoption will drive reacceleration in its sagging data center segment.
The firm raised its 2017 and 2018 revenue and earnings per share estimates. Reflecting the crypto tailwind and the Volta optimism, the firm raised its price target for Nvidia shares to $200.
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