Analysts see AMD competitive positive improving after Next Horizon event

Following AMD's (AMD) Next Horizon event, KeyBanc analyst Weston Twigg told investors that he believes growth will likely accelerate in 2020 on the company's "compelling" datacenter strategy. Meanwhile, his peer at Jefferies argued that he sees AMD's competitive position improving given upcoming "watershed" events. NEXT HORIZON EVENT: Yesterday, AMD and Amazon Web Services (AMZN) announced at Next Horizon the immediate availability of the first AMD EPYC processor-based instances on Amazon Elastic Compute Cloud. The new instances are available as variants of Amazon EC2's memory optimized and general purpose instance families. AMD-based M5 and R5 instances are available in six sizes with up to 96 vCPUs, up to 768 GB of memory. AMD-based T3 instances will be available in 7 sizes with up to 8 vCPUs and 32 GB of memory. The new instances can be purchased as On-Demand, Reserved, or Spot instances. AMD also announced the AMD Radeon Instinct MI60 and MI50 accelerators, the world's first 7nm datacenter GPUs, that it said are "designed to deliver the compute performance required for next-generation deep learning, HPC, cloud computing and rendering applications." The company added that "researchers, scientists and developers will use AMD Radeon Instinct accelerators to solve tough and interesting challenges, including large-scale simulations, climate change, computational biology, disease prevention and more." COMPETITIVE POSITION IMPROVING: Following the company's datacenter day, Jefferies analyst Mark Lipacis told investors that he believes three "watershed" events over the next 6 months will materially improve AMD's competitive position in datacenter and position it to increase its share to 30% from 3% in the $29B datacenter market over the next 3-to-5 years. Specifically, he pointed toward the world's first 7nm GPU available in the fourth quarter, the world's first 7nm Server MPU available in the second quarter, and AWS deploying AMD Server MPU instances at a 10% discount to Intel (INTC) now. The analyst reiterated a Buy rating and $30 price target on AMD shares. Meanwhile, Craig-Hallum analyst Christian Schwab raised his price target for AMD to $27 from $21 and reiterated a Buy rating on the shares. Exiting AMD's Next Horizon event, the analyst has increased confidence in the company's product portfolio strength, which he expects to drive sustainable revenue growth and continued market share gains. GROWTH LIKELY TO ACCELERATE IN 2020: In a research of his own, KeyBanc's Twigg noted that AMD outlined its datacenter product roadmap at Next Horizon event and said he believes its share-gain and TAM expansion opportunities are "real and compelling." New product traction will likely take time, potentially setting up a very strong 2020, he contended. However, Twigg sees moderate near-term risk as hyperscale demand is slowing and as AMD has relatively high valuation compared to peers, keeping expectations high. The analyst reiterated a Sector Weight rating on the shares. PRICE ACTION: In afternoon trading, shares of AMD have gained over 5% to $21.75.

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