Is Wall Street Underestimating Advanced Micro Devices (AMD) in the Server Market?

Rosenblatt's Hans Mosesmann sheds bullish light on AMD following Monday's Computex conference in Taiwan.

Advanced Micro Devices (NASDAQ:AMD) put on display a strong presentation and roadmap update at Taiwan’s Computex on Monday night, with the buzz of the evening all about “momentum.” Rosenblatt analyst Hans Mosesmann sees a chip giant blazing forward, a clear line drawn against “more modest updates” from rivals Intel and Nvidia.

In reaction, the analyst reiterates a Buy rating on AMD stock with a $27 price target, which implies a close to 79% upside from current levels. (To watch Mosesmann’s track record, click here)

“Although Computex is not a server show, AMD showed off its 7nm-based server EPYC Zen2 CPU which is at AMD labs now and looking ‘really’ good and will sample soon with production in 2019. Note that AMD is prioritizing 7nm for server CPUs first and is taking advantage of Intel’s 10nm process node delay which suggests AMD could have both an architectural and process node advantage for 2019. Inconceivable,” asserts Mosesmann.

AMD for instance unleashed Threadripper Gen2 at 32-cores utilizing 12nm process technology, leveraging a “cost effective multi-die packaging” strategy. At the same conference, Intel’s demo of a 28-core desktop CPU at peak 5 GHz utilizing 14nm++ already in play was more intriguing on a level of margins to Mosesmann. The analyst muses as to if the rival’s giant chip has potential to “ever” surge in substantial volume. Additionally, Mosesmann draws note to AMD’s disclosure along with demo of its 7nm Radeon Instinct GPU in compute-focused workloads. This is not only “months” but potentially “quarters” faster than Nvidia’s shift over to 7nm. Mosesmann finds AMD to win against its competition from Intel to Nvidia “at their game” an absolute surprise in terms of the process node arena.

The chip giant exhibited a slew of notebooks from every one of the other key players and showed off its standing as the quickest CPU for Ultrathin form factors, maximizing the company’s standout integrated graphics IP. Looking ahead, the analyst angles for notebook penetration to meet or exceed that of desktops in the present-day cycle.

Ultimately, “Computex and recent new announcements from Cisco […], HPE […], and Tencent […] in their intention to deploy EPYC server CPUs are proof points that the current Zen/Zen2 CPU cycle is set to match if not exceed the 2006 peak in x86 CPU share of ~25%,” concludes Mosesmann, who wagers: “AMD’s GPU and its strategy to optimize its CPU and GPU platform solutions indicates to us that AMD may be a more relevant player than the Street is willing to accept.”

TipRanks suggests caution divides Wall Street when it comes to AMD’s market opportunity at hand. Out of 17 analysts polled in the last 3 months, 9 are bullish on AMD stock, 6 remain sidelined, while 2 are bearish on the stock. With a return potential of 6%, the stock’s consensus target price stands at $15.80.

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