Could the “Epyc” serve chip be the grand slam Advanced Micro Devices, Inc. (NASDAQ:AMD) needs to gain the edge on rival chip maker Intel? Is now a golden sales era for semiconductors, making Micron Technology, Inc. (NASDAQ:MU) an enticing buy, thanks to its strength in memory? From the eyes of Wells Fargo analyst David Wong, all roads point to the bulls for these two chip giants, “as the semiconductor recovery, which began in mid-2016 continues.”
As such, the analyst reiterates an Outperform rating on shares of AMD with a $15 price target, marking a 17% increase from current levels, and likewise reiterates an Outperform rating on MU with a $40 price target, which represents a close to 33% increase from where the stock is currently trading. (To watch Wong’s track record click here.)
Wong sees enough writing on the wall to shake up INTC, giving the advantage to AMD. “It appears to us, from the small amount of third party data available to date, that AMD’s EPYC server processors may well offer better absolute performance and price/performance than Intel’s current Broadwell generation server processors, and perhaps comparable performance and price/performance to Intel’s upcoming Skylake processors which are scheduled for launch next month on July 11,” asserts the analyst.
In fact, Wong believes AMD has picked up some improved tricks, learning from past challenges, noting, “AMD achieves high core counts on its top end EPYC processors by packaging up to 4 chips together, connected by the company’s Infinity fabric. In the past, both Intel and AMD have struggled to compete effectively with multi-chip server processor solutions. […] The impressive SPEC benchmarks posted for the 4-chip EPYC 7601 suggest, we think, that AMD’s Infinity fabric does facilitate a high performance multi-chip solution. Nevertheless we will be looking for additional data and third party commentary to provide confirmation of this.”
In general, May has been good to the semiconductor sector’s sales, as far as the Semiconductor Industry Association is concerned when assessing fresh data, with sales seeing a surge to the tune of almost 24% year-over-year in dollars. “SIA numbers imply that May was the 11th month in a row of year/year growth and the seventh month in a row of double digit percent growth,” opines Wong, who though points out that some “other data points have been more mixed,” he remains encouraged that Micron is a wise buy.
Ultimately, “The large growth is being driven in part by memory, which boosted overall integrated circuit (IC) year/year growth by 11 percentage points in May […] While the SIA monthly data continues to suggest strength in demand, other data points have been more mixed. We think growth for ICs excluding memory might plateau rather continue to move up. We continue to see good investment opportunities within our coverage but we have become more selective in our stock picks,” Wong concludes, vying for both AMD and Micron as two solid stock contenders.