This week, investors piled on Advanced Micro Devices’ (AMD) stock to take advantage of the bullish announcement that Google’s new Stadia platform would be powered by AMD GPUs. The relationship provides a big boost to AMD’s data center business, as shares shot up 17% since the news broke. Based on its Vega architecture, the custom-made AMD GPUs will provide more than 2x faster raw computing power than the PlayStation 4 Pro, and nearly double that of the Xbox One X.
Rosenblatt analyst Hans Mosesmann believes the stock has more room to run as he maintains a Buy rating on AMD, with a $42 price target, which implies over 50% from current levels. (To watch Mosesmann’s track record, click here)
Mosesmann says the “conventional view…[is] that AMD is incapable of gaining key chip socket wins or share in CPU or GPU market segments.” So while some may question how a “less competitive AMD” was able to capture Google, Mosesmann says “Google…[is] not choosing AMD 7nm GPUs b/c they are less competitive, they are doing so because they are more competitive.”
AMD is showing promise moving towards its new 7nm launch, while rivals are lagging behind with larger chips. Mosesmann says by moving from “16nm GPUs last year…[to] 7nm,” AMD is becoming “more competitive vs. Nvidia GPUs that are still at 16/12nm in 2019.” With that, the analyst believes “AMD is not less competitive; the GPU lineup is more competitive, obviously.”
Another myth Mosesmann wants to debunk is the notion the “the future of accelerated compute is all about GPU’s only.” If this were the case, the analyst argues Nvidia would “clearly” have the advantage. But Mosesmann says, “there are important segments that prize CPU/GPU optimization and Nvidia simply does not have a server-class CPU strategy. It is not a random event that AMD controls the game console silicon (CPU/GPU) at Sony and Microsoft and it suggests strongly that AMD should play a significant role in cloud streaming gaming (console in the cloud).”
The bottom line, in Mosesmann’s view, is that “the AMD story just got an injection of GPU gaming/compute juice that the street may not have anticipated yesterday,” which explains such a surge in trading. The analyst likes the “CPU share gain dynamic for AMD with 7nm CPU disruption starting in 3Q19, and an interesting and emerging GPU compute/gaming share gain dynamic that is in the billions of dollars in terms of TAM opportunity.”
Though AMD shares plummeted nearly 50% at the end of 2018, the stock is back up over 50% from its 2018-low. TipRanks analysis of 20 analyst ratings on AMD shows a consensus Moderate Buy, with ten recommending Buy, nine recommending Hold and one saying Sell. The price target among these analysts stand at $26.06, suggesting the stock has limited upside from current levels. (See AMD’s price targets and analyst ratings on TipRanks)