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Why AMD Stock Surged Today

By Joe Tenebruso – Aug 12, 2020 at 7:25PM

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The chipmaker is advancing its beachhead into the massive server market.

What happened

Shares of Advanced Micro Devices (AMD 2.47%) jumped 7.5% on Wednesday, as a broad rise in tech stocks helped drive the Nasdaq Composite index sharply higher.  

So what 

AMD's gains come after bullish analyst remarks earlier this week. On Tuesday, D.A. Davidson analyst Ben Wilson highlighted what he says is a rapid deployment of AMD's processors by Amazon (AMZN -0.03%). The e-commerce giant is reportedly ramping up its use of AMD's next-gen chips on its Amazon Web Services cloud computing platform, which Wilson sees as a powerful growth driver for AMD's data center business. 

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Image Source: Getty Images.

Wilson's observations support the investment thesis laid out by Jefferies analyst Mark Lipacis on Aug. 4. Lipacis expects AMD to rapidly eat into Intel's (INTC -0.06%) data center market share, due in part to the latter's difficulties in transitioning to new 7-nanometer chips. Lipacis says Intel's struggles could help AMD seize 50% of the server market within the next five years, up from roughly 10% today. 

Now what

Intel's problems are certainly working in AMD's favor. A cloud computing titan like Amazon quickly adopting its newest chips bodes well for AMD's future. The chipmaker's shares are already up an impressive 80% so far in 2020, but if it can continue to press its advantage over the ailing Intel, more gains could lie ahead for AMD's shareholders.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Intel and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$67.94 (2.47%) $1.64
Intel Corporation Stock Quote
Intel Corporation
INTC
$26.95 (-0.06%) $0.01
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$115.11 (-0.03%) $0.04

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