What happened

Shares of Advanced Micro Devices (AMD -2.74%) fell 17% in March of 2018, according to data from S&P Global Market Intelligence. The plunge started when the first specialized cryptocurrency mining tools for Ethereum tokens were announced.

So what

Ethereum tokens have traditionally been low-hanging fruit for cryptocurrency miners running on graphics cards from AMD and NVIDIA (NVDA 1.58%). The algorithm used in Ethereum mining requires more memory and less math-crunching horsepower than that of bitcoin, making it suitable work for memory-rich GeForce and Radeon cards.

That changed in mid-March, when mining hardware giant Bitmain announced its first Ethereum-specific mining box, the Antminer E3. Taking Ethereum mining out of the hands of graphics card rigs could damage AMD's revenue streams and bring stock prices down to earth after the crypto-powered surge of 2017.

Grey Ethereum logo on a white field.

Image source: the Ethereum Project.

Now what

Analyst firm Susquehanna was quick to act on the Antminer E3 news, downgrading AMD to a sell rating and lowering its price targets for NVIDIA. Together with several other details such as lower Ethereum prices and planned technical changes to the mining process, the special mining box essentially spells doom for AMD's Ethereum-based sales. On top of that, Radeon cards previously used for Ethereum mining should flood the secondhand market and undermine the value of new graphics cards for most consumers.

According to Susquehanna's analysis, Ethereum-based sales might amount to roughly 20% of AMD's total revenues in recent quarters (and 10% of NVIDIA's). Expect this topic to loom large over AMD's first-quarter report and earnings call in a couple of weeks. If Susquehanna's estimates are in the ballpark, we should see extremely low revenue guidance hamstring AMD's share prices.