AMD’s inventory rises to record high as chipmaker takes more market share from Intel

The shares of Advanced Micro Devices Inc. closed at a new all-time high on Wednesday as Wall Street analysts appeared to be in step with the chip maker’s strong results: AMD will cut Intel Corp.’s luncheon. eat at least a few more years, with a little help from his friends.

AMD AMD,
+7.58%
shares closed 7.6% at $97.93 on Wednesday, for not only a record high, but also their best one-day gain in a year, as they rose nearly 13% on July 29, 2020. The stock last closed at a record high on January 11, at $97.25.

AMD released second-quarter results on Tuesday afternoon that easily exceeded expectations, and the chipmaker once again raised its expectations for the year as data center sales nearly tripled. Chief Executive Lisa Su said AMD is making progress in securing “additional” funds to solve the global chip shortage.

The report contrasted with the struggles of bigger rival Intel INTC,
-0.21%,
who drafted its product roadmap on Monday, predicting it would regain its position as a leader in the chip space by 2025, while renaming its chips, ditching the use of transistor size to mark performance. Analysts weren’t too impressed with Intel’s plan, similar to their reaction when Intel reported its results last week.

Analysts were impressed with AMD, however, with at least seven raising their price targets Wednesday morning in response to the results. Susquehanna Financial analyst Christopher Rolland raised his price target from $125 to $130, raising a theme that’s been getting a lot of attention lately: AMD is navigating the chip shortage with “extra” resources especially well as Taiwan Semiconductor Manufacturing Co. tsm,
+1.35%
second largest customer — Apple Inc. AAPL,
-1.22%
is the largest. The theory assumes that TSMC has an incentive to take sides as Intel wants to compete with the manufacturer by expanding its own foundry business.

“While the AMD procurement team is to be applauded, we can also envision TSM supporting their favorite CPU customer with additional wafers,” said Rolland, who has a positive assessment of the stock.

Read: The chip crunch continues, but one sector can offer relief

Cowen analyst Matthew Ramsay, who has an outperform rating and a price target of $120, has also touched on that theme.

“To us, the fact that the company is comfortable providing such impressive growth guidance demonstrates the strength of its partnership with TSMC and the confidence in demand from key cloud and OEM customers earned through years of innovation and roadmap development in the making,” said Ramsay.

Ramsay also pointed to the fact that AMD, which is usually reluctant to reveal its data center figures, said more than 20% of its revenue came from booming data center sales, and expects this to grow. Cowen’s analyst said he now estimates AMD will get about 25% of its revenue from server sales in the second half of the year.

Jefferies analyst Mark Lipacis, who has a buy on the stock, also believes Intel’s share gains will accelerate, and sees data center sales growing significantly as part of AMD’s business.

“We estimate AMD stock earnings will continue to accelerate,” Lipacis said, estimating data center sales will account for about 28% of AMD’s revenue in the fourth quarter, up from the “high.” teens” the company admitted in the first quarter. .

Bernstein analyst Stacy Rasgon, who has a market performance rating and a price target of $110, said it was “a very clean quarter for AMD, and admittedly there was very little to criticize about these results.”

Rasgon said AMD’s forecast of 60% revenue growth for the full year, up from its earlier forecast of 50% growth, “is hard to despise.”

The Bernstein analyst also said that “gross margins are finally starting to bend, and Intel’s hopes for ‘stable’ stock in the back half are clearly in the air, with (given Intel’s admissions earlier this week) AMD’s competitive window likely still open to year.”

See also: Intel seems to be feeling AMD’s competitive heat

Citi Research analyst Christopher Danley, who maintained his neutral valuation due to AMD’s stock price but raised his target from $95 to $100, believes “AMD can continue its growth trajectory due to ongoing manufacturing slowdowns at Intel, which we believe could happen for 7nm products as well.”

“We believe AMD’s market share gains in the server market will accelerate over the next two years thanks to AMD’s one-generation-advanced server CPU products,” Danley said.

Of the 38 analysts covering AMD, 23 have a buy rating, 13 a hold rating, and two have a sell rating. Analysts’ average price target rose to $109.46 from a previous $104.22 with increases from Tuesday, according to data from FactSet.

In the past 12 months, AMD shares are up 42%. For comparison: the PHLX Semiconductor Index SOX,
+1.76%
has gained 58%, the S&P 500 index SPX,
-0.02%
is up 37%, and the tech-heavy Nasdaq Composite Index COMP,
+0.70%
has increased by 42%.

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