AMD's (AMD -2.69%) stock surged more than 1,400% over the past five years as the chipmaker executed a remarkable turnaround amid intense competition from Intel (INTC -5.42%) and NVIDIA (NVDA -2.61%). Let's look back at how AMD rebooted its business, and whether or not its momentum will continue over the next five years.

What happened to AMD over the past five years?

Dr. Lisa Su, an industry veteran who previously worked at Texas Instruments, IBM, and Freescale, joined AMD in 2012 as a senior VP and general manager of AMD's global business units. She was appointed its CEO in 2014.

Su diversified AMD's business beyond PCs by developing semi-custom chips for Microsoft (MSFT -0.74%) and Sony's (SONY -0.40%) gaming consoles and other embedded devices. Sales of those chips bolstered AMD's EESC (enterprise, embedded, and semi-custom) business, diversified its revenue away from PC chips, and generated stronger cash flows for the development of new x86 CPUs and gaming GPUs.

AMD CEO Lisa Su.

Image source: AMD.

That strategic reset fueled the development of AMD's Ryzen CPUs, which replaced its poorly received Bulldozer CPUs, as well as new Radeon GPUs. AMD also challenged Intel in the high-end desktop market with its Ryzen Threadripper CPUs, in the data center market with its Epyc CPUs, and the notebook market with Ryzen's mobile APUs.

AMD gained market share against Intel, and it pulled ahead in the manufacturing process with 7nm chips as Intel struggled to ramp up its 10nm chips. Many OEMs also pivoted toward AMD's chips as Intel struggled to resolve its ongoing chip shortage. AMD also gained ground against NVIDIA again, as its quarterly GPU shipments surpassed NVIDIA's for the first time in five years in the second quarter of 2019. The cryptocurrency mining boom also amplified demand for its GPUs.

Those catalysts sparked AMD's massive growth spurt over the past four years, but its growth decelerated significantly in 2019 as sales of the PS4 and Xbox One cooled off:

YOY growth












YOY = Year-over-year. Source: AMD annual reports.

What will the next five years bring for AMD?

Wall Street currently expects AMD's revenue to rise 30% in 2020 and 19% in 2021. Investors should always take analysts' forecasts with a grain of salt, but two main catalysts could help AMD hit those targets.

Microsoft's Xbox Series X.

Image source: Microsoft.

First, Microsoft and Sony will launch their next-gen consoles, the Xbox Series X and PS5, at the end of the year. AMD's custom APUs will power both consoles. Microsoft and Alphabet's Google are both using custom AMD GPUs in their cloud gaming platforms, xCloud and Stadia. Those tailwinds could significantly boost its EESC revenue over the next few years.

Second, AMD could continue to gain ground against Intel and NVIDIA in the x86 CPU and gaming GPU markets, respectively, with new generations of Ryzen and Radeon chips.

But AMD also faces several unpredictable headwinds. AMD remains ahead of Intel in the nanometer race, but Intel expects to start producing 7nm chips by 2021. If Intel resolves its chip shortage and gets its act together, AMD could struggle to keep pace with its bigger rival in the R&D and marketing departments.

Investors should also be wary of potential production bottlenecks for 7nm chips at AMD's manufacturer TSMC (TSM -3.55%), which could occur as other top customers -- like Apple and NVIDIA -- ramp up their production of 7nm chips.

Intel also plans to launch its own discrete GPU later this year, which could crack AMD and NVIDIA's duopoly in the GPU market over the next few years. NVIDIA is also aggressively targeting lower-end gamers with budget cards like the GTX 1650 Super, and that strategic shift could temper AMD's market share gains. New cloud gaming services -- like NVDIA's GeForce Now, Stadia, and xCloud -- could also throttle sales of dedicated gaming GPUs as they reach mainstream gamers.

The key takeaways

AMD probably won't replicate its multibagger gains over the next five years, but it could still head higher if Lisa Su remains in charge. New gaming consoles should start generating fresh cash for the chipmaker in late 2020, and AMD will likely funnel that cash into the development of new CPUs and GPUs to hold Intel and NVIDIA at bay.

It won't be an easy battle, but Su transformed AMD from an also-ran into a disruptive threat over the past five years. If AMD capitalizes on that momentum, its growth will likely accelerate again and lift its stock to fresh highs.