managed to reverse a long-standing bear on Thursday after the chipmaker accelerated its market share in server processors at the expense of rival
analyst Christopher Danely increased its call on AMD stock (ticker: AMD) from sell to neutral and raised its price target from $17 to $95 – a 459% spike.
Danely wrote in a note Thursday that his team’s checks indicate AMD is gaining market share from Intel (INTC) for the first time in 15 years — with 1.5% gains in the first quarter. He predicts earnings will continue and AMD will reach 20% market share by the end of 2022, close to the company’s previous peak. At the beginning of 2019, AMD had a share of about 2.5% in server multiprocessing units, according to Citi data.
AMD’s market share gains should last at least two years, he said, partly by taking advantage of lingering manufacturing problems at Intel. Intel’s next-generation manufacturing technology will suffer from delays, the analyst predicted. Production delays likely mean Intel’s margins will shrink, as semiconductor manufacturers typically increase their profits the longer a chip is produced.
For investors who agree with Danely’s statement, the analyst recommends a pairs trade: an underweight Intel stock and an overweight AMD stock. A pairs trade typically involves two stocks whose movements are inversely linked: an investor short or bet on one while taking a long position in the other. Danely wrote that the risks to such trading include Intel solving its production issues in a shorter-than-expected time frame and AMD experiencing delays with its server chips.
Previously, Danely had justified his relatively low AMD target price with a prediction that Intel would enter a price war with AMD and crush its progress in markets dominated by Intel. Danely wrote that he still sees a price war in central processing units as likely, and now expects it to begin as PC sales cool and Intel’s market share loss increases.
Despite Danely’s positive appeal to AMD – and a video game hardware announcement with the company’s chips – shares fell 2.4% to close out the regular session at $86.93. Intel shares fell 1.3% to $55.81 amid broad weakness in technology, including chip stocks, after
Taiwan semiconductor manufacturing
(TSM) reported gains before the opening bell Thursday. The
PHLX Semiconductor Index
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