Advanced Micro Devices (AMD -1.81%) has made impressive strides to boost its sales of processors for servers, and taken market share away from Intel (INTC 1.74%) in the process. Its bigger rival still dominates this niche, but things are about to get even better for AMD in 2021.

The chipmaker reportedly increased its server market share from 5% to 8% in 2019, and its share hit double-digit percentages in the second quarter of 2020. According to an article in DigiTimes, some semiconductor industry watchers expect that AMD could double its server market share in 2021 and end the year with 20% of the market. While that's an ambitious forecast, don't be surprised to see it come to pass: AMD is about to heap more pain on Intel with its newest processors.

A bag full of money.

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AMD launches a broadside at Intel

AMD has finally given investors a peek at its third-generation EPYC server processor -- dubbed "Milan" -- based on the Zen 3 microarchitecture. While the details are sparse as the chipmaker only previewed the new processor at CES 2021, it seems that AMD is about to deliver another gut punch to Intel.

AMD demonstrated two Milan processors at CES by having them run a weather prediction simulation, pitching them against Intel's Xeon Gold 6258R. The Milan was 68% faster than the Xeon processor in single-socket performance, and also took the prize in dual-socket performance, where it was 46% faster.

Investors should take these results with a grain of salt, as they came from the company, not an independent third-party. Moreover, the CES event was only a preview, not a real-world test. It would be prudent to wait and see what independent testers have to say about the processors' comparative speeds after the Milans are launched and AMD's claims can be checked.

But it won't be surprising to see these upcoming AMD server chips beat Intel's by a comfortable margin, for a few simple reasons. First, AMD's Zen 3 microarchitecture has helped the chipmaker achieve 19% IPC (instructions per cycle) gains in desktop chips over the preceding architecture. To put it more simply, chips based on AMD's new platform can complete more tasks in one cycle because of a refined manufacturing process.

This brings us to the second reason why AMD could hammer Intel yet again in servers this year. The Milan chips are based on a 7-nanometer (nm) manufacturing node, and while that's the same as the previous generation Rome chips, the Zen 3 microarchitecture has certain improvements in thermal management and a unified memory cache to remove latency. This allows the new chips to perform better than the previous generation, and blow Intel's offerings out of the water as the Xeon processor AMD was pitted against in the preview is built using an inferior 14nm process.

Intel is trying to recoup some of the ground it lost to AMD with its 10nm Xeon scalable processors, which have already gone into production. Chipzilla will start the volume ramp of these chips in this quarter. But it remains to be seen how much good that will do, given that AMD has already refined its 7nm process with the third-generation EPYC Milan chips, which are expected to launch this quarter.

Huge financial gains in the cards

If AMD's new chips perform in line with its claims and it lures more of the market away from Intel this year as a result, it could add billions of dollars to its revenue from the data center market.

The chipmaker looked to be on track to mint $1.5 billion from the data center business in 2020 after generating an estimated $1 billion from this segment the year before. AMD estimates that the size of the server CPU market could hit $19 billion by 2023. A 20% share of that would amount to $3.8 billion, which suggests that AMD's data center revenue could in just a few more years almost quadruple from its 2019 level and more than double from its 2020 mark.

But AMD could also kick things up a gear and take an even larger share of the server processor market in the next two years because it's expected to move to the 5nm Zen 4 microarchitecture next year. That could certainly help it widen the gap with Intel. So, AMD could continue to win big in the data center market by clawing away market share from Intel. This is one more reason for investors to buy this top growth stock, which has other solid catalysts to boot.