What happened
Shares of chip designer AMD (AMD +1.63%) were down 5.4% today as of 12:45 p.m. ET. It's a down day for the market overall, with the Nasdaq Composite index sporting a 1.8% decline. However, AMD said today it is investigating a possible data breach, and pressure from sagging GPU prices may also be contributing to today's AMD sell-off.
NASDAQ: AMD
Key Data Points
So what
Specifically, AMD said this morning it is looking into a claim by cybercrime group RansomHouse, which says it stole 450 GB worth of data (various network files and general company info) earlier this year thanks to weak password protection at the semiconductor company.
Of greater concern, though, are ongoing reports of slumping GPU (graphics processing units, chips used for video games) prices. Consumer-facing products made up 47% of AMD's revenue during the first quarter, so a drop-off in demand is concerning. However, this is more than just a slowdown in consumer spending.
GPUs are also used in cryptocurrency mining, and now that the crypto market has tanked, some miners are flooding the secondary market with their old GPUs. Additionally, Ethereum is moving to a proof-of-stake model later this year. Proof-of-stake is a less computing-intensive process that will likely reduce demand for GPUs for the Ethereum blockchain network going forward, so AMD might lose some ancillary revenue here.
Now what
The upshot for AMD, though, is that consumer products are becoming a smaller portion of the business overall. The acquisition of industrial and enterprise chip designer Xilinx was completed earlier this year, creating new end-markets for AMD to sell hardware to. And its data center revenue is also booming. Its EPYC processors helped drive an 88% year-over-year increase in sales for AMD's "enterprise, embedded and semi-custom" segment in the first quarter of 2022.
AMD stock is now down 47% so far in 2022 and trades for 31 times trailing-12-month free cash flow. Expect more turbulence ahead, but this remains a top bet among semiconductor stocks.
