The gap between Advanced Micro Devices (AMD) and Intel (INTC) seems to be narrowing. While AMD has always been the “little guy,” its soon-to-be-launched 7nm chip is sure to rattle the industry. Meanwhile, Intel is facing massive challenge in development of its 10nm chip, which is also playing a large role in the shifting market dynamic. More than that, AMD has been contracted by the US Government to develop (in part with Cray) the world’s most powerful supercomputer. While this will not have a significant impact on revenue, it does signal that confidence in AMD products are growing.
Either way, Nomura analyst David Wong maintains his Buy rating on both AMD and INTC stocks. The analyst sees nearly 25% upside ahead for AMD with a $33 price target, and 46% upside for INTC with a $65 price target. (To watch Wong’s track record, click here)
AMD stock had a nice run this year. Though it had a wild 2018 — surging nearly three times before dropping 50% — investors have pushed the stock up 45% so far in 2019 as confidence has returned to the chip market. Among the drivers, says Wong, is “AMD’s opportunities for market share gains in data center CPUs and GPUs,” as data center processor unit share grew to as high as 3.7% earlier this year.
And of course, Wong, like many other analysts and investors, is excited for the launch of the 7nm Rome processor. The new chip is slated for a September-quarter launch, with Wong saying the company “might be able to grow its data center processor unit and revenue market share to close to 10% by the end of 2020,” with help from the new product. This is a major turnaround for a company that Wong believes “earned very little revenue from datacenter GPUs,” prior to 2018.
While AMD is making strides against rival Intel, the latter is still the leader. Wong says “Intel continues to dominate the data center processor market, with 86% of combined Intel/Nvidia/AMD data center revenues in the March 2019 quarter,” and he believes the company “addresses a far larger portion of the overall accelerator space than Nvidia.”
But Wong is also excited about the prospects that the Intel acquisition of Mobileye brings. While there are challenges in markets with AMD growing quickly, Wong says “Mobileye revenues have moved meaningfully above Nvidia’s automotive segment sales, and we expect ongoing momentum through 2019 will widen Mobileye’s lead.” Nvidia is looked at as a main competitor in the auto space to Mobileye, as the market is expected to grow rapidly as autonomous cars become more popular.
Overall, analysts don’t see Intel and AMD on the same field. TipRanks analysis of 29 analyst ratings shows a consensus Hold rating on Intel, while 21 analyst ratings on AMD shows a Moderate Buy rating. Both Intel and AMD have average price targets 15% higher than their current levels. (Click here to see AMD’s price targets and ratings on TipRanks, and here for Intel)
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