AMD’s Market Share Gain Story Remains Intact

AMD Microchip

Advanced Micro Devices (NASDQ:AMD) stock jumped nearly 8% to $31.38 in Thursday’s early session after the company announced the release of Epyc 2, its newest chip for data centers. The chipmaker also said that it has won Alphabet’s Google (NASDAQ:GOOG, GOOGL) unit and Twitter (NASDAQ:TWTR) as customers.

AMD makes processors for data centers that power internet-based services. It competes with Intel (NASDAQ:INTC) which has been a dominant force in the data center space and in the PC processor market for many years to supply chips that act as the main computing brains for PCs, servers, gaming and artificial intelligence.

Apart from having ’only’ 32 billion transistors and as many as 64 cores, AMD said its 2nd Gen Epyc processors – largely thought to be a product that will allow the company to grab some serious data centers market share from Intel – deliver twice the price performance of Intel’s fastest available chips.

Forrest Norrod, senior VP of the Datacenter and Embedded Solutions Business Group at AMD, said Epyc 2, code-named “Rome”, has twice the performance of Intel’s top chip at half the price.

“Rome kicks ass,” he said. “The new standard for the datacenter is Epyc.”

Last week, AMD reported earnings of $0.08 per share, matching Wall Street’s expectations. The Santa Clara, Calif.-based company posted revenue of $1.53 billion, compared to estimates of $1.52 billion. Guidance however, for the current quarter and full fiscal 2019 came in lower than expected.

AMD provided 3Q19 revenue guidance of $1.8 billion +/- $50 million, lower than estimates of about $1.95 billion. Still, the new guidance – which was largely due to a weak semi-custom business – represents year-over-year growth of 9%. What’s more, AMD’s newest gen of server chips should allow it to continue to win new customers and as a result data centers market share.

In fact, Jefferies’s Mark Lipacis on Wednesday confirmed this assumption, anticipating in a note to investors a favorable server CPU upcycle ahead for AMD. The analyst said he expects the company to gain another 10 percentage points of server Micro Processing Unit share over the next 12 to 18 months.

Lipacis, who has an buy rating rating and a $40 price target on AMD shares, noted that the chipmaker gained about 2 to 5 percentage points of chip share in the server, desktop, and notebook markets in 2Q19 versus 2Q18.

Meanwhile, Paul Alcorn of tom’s hardware believes the unveiling of AMD’s EPYC 2 processors “marks not only the culmination of the company’s big bets made years in advance, shrewd go-to-market strategies, and clever engineering, but it could also mark the beginning of the biggest upset in semiconductor history.”

As of writing, AMD stock, currently trading for more than 30x for 2019 non-GAAP earnings, is up $3.50, or 12.16%, to $32.70 in midday trading Thursday.

References: Venturebeat, Barron’s

About Ari Haruni 102 Articles
Ari Haruni is the Co-Founder & CEO of Wall Street Pit.

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