Advanced Micro Devices, Inc. (AMD) Is Not Going to Close the Intel Gap Anytime Soon; NVIDIA Corporation (NVDA) Gets a Price Target Lift on Volta’s AI Popularity

Citi: AMD doesn't stand a chance next to Intel; Jefferies: The AI playing field is Nvidia's to lose.


AMD Lacks Ability to Sustain Share Gains

Advanced Micro Devices, Inc. (NASDAQ:AMD) investors may have been granted a third quarter earnings beat yesterday from the chip giant, but are scurrying today in the aftermath of a weak outlook, sending shares plunging 9% in pre-market trading today.

Citi Research analyst Christopher Danely sounds off blasting from the side of the bears, critical that the company is still leaking dollars even with new products released. In a chip-maker-eat-chip-maker world, Danely’s money is on AMD to get eaten up, especially when having to brace for the impact of rival Intel’s new “Coffee Lake” processor family, fresh out 20 days ago.

“We see the competitive environment for AMD CPUs getting more difficult over time as the competition continues to introduce new processors,” writes the analyst, who notes that a month that has seen Intel let loose its fresh line of CPUs, the company now seems to “have extended its performance lead.” Glancing ahead, the situation does not look much better for AMD: “We see the competitive environment for AMD CPUs getting more difficult over time as the competition continues to introduce new processors.”

To put it very bluntly, the analyst cheekily notes, “Despite new products, AMD is still losing money we see no change in sight as it falls further behind the competition.”

AMD Ryzen processors have been underclassing Intel’s chips to the harsh tune of roughly 20%, and even if AMD can make up some of the lost market share, it will only be a rise of 7.2%. In other words, not enough for AMD to beat the competition.

“We do not expect share gains to be sustainable,” Danely contends, believing AMD will not be able to recover its lost lead at the end of the day: “We believe AMD’s next process should not be sufficient to close the current performance gap and Intel’s next process should increase the performance gap.”

As such, the analyst reiterates a Sell rating on AMD with a $5 price target, which represents a 61% increase from where the stock is currently trading. (To watch Danely’s track record, click here)

Wall Street is more optimistic than this staunch bear who has been dismissing the tech player for the last three years, as TipRanks analytics exhibit AMD as a Buy. Out of 20 analysts polled by TipRanks in the last 3 months, 8 are bullish on AMD stock, 9 remain sidelined, and 3 are bearish on the stock. The stock’s consensus target price stands at $14.38.

Nvidia Is a Stock Favorite

NVIDIA Corporation (NASDAQ:NVDA) is a stock primed for outperformance, predicts Jefferies analyst Mark Lipacis, who believes in a future tech world that will soar on artificial intelligence (AI) technology, this chip giant is a gains-worthy one to back.

Believing that the Volta chip will carry the giant to mega market capture down the line, the analyst maintains a Buy rating on NVDA stock while boosting the price target from $180 to $230, which represents a 16% increase from where the stock is currently trading. (To watch Lipacis’ track record, click here)

Keep in mind that the company’s graphic processing chips have already performed well among gamers, and with the Volta line of AI processors out for nearly half a year now, the stock as of October 20th had vaulted 192% in a year’s time. With the S&P 500 merely racking up 20% in 12 months, by FactSet’s analysis, Nvidia is exhibiting the most stellar showcase in all of the S&P 500.

Benefiting from strong AI demand, the analyst predicts the Volta chip will perform well in an AI world and “will translate to upside surprises over the next 18-24 months” for the chip giant.

Therefore, one assertion that is not a surprise is that “Nvidia remains a top pick” for Lipacis, with the analyst wagering that down the line, NVDA could be capturing 80% of the majority market piece of the pie. In PC and smartphone universes where titans like Apple and Microsoft have come to reign early on, commanding top spots on the leaderboard for the long-term, Lipacis bets on Nvidia to dominate industry profits in the AI chip market arena.

For fiscal 2019, the analyst calls for Nvidia to yield $4.12 in EPS, more bullish than the Street’s expectations angling for $4.00.

Wall Street largely likes the semiconductor stock, considering TipRanks analytics demonstrate NVDA as a Buy. Based on 25 analysts polled by TipRanks in the last 3 months, 15 rate a Buy on Nvidia stock, 7 maintain a Hold, while 3 are bearish on the stock. The 12-month average price target stands at $178.41, marking a 10% downside from where the stock is currently trading.