What happened
Shares of chipmaker Advanced Micro Devices (AMD 1.33%) were up strongly again on Friday even after Thursday's epic tech sector rally, rising 5.8% as of 1:05 p.m. EST.
AMD unveiled the newest generation of its EPYC data center chips yesterday, and apparently the new specs were a hit with analysts and investors alike. AMD and its foundry partners have come to market faster than rival Intel (INTC 1.77%). Its newest-generation data center processors could enable AMD to make even more market-share gains in the all-important data center segment than it has already made this year.
So what
In their presentation yesterday, AMD management said the new fourth-generation EPYC chips, code-named "Genoa," have 2.8 times the performance while using up to 54% less power than the existing Intel rival "Ice Lake." Of note, Intel's upcoming data center chip, code-named "Sapphire Rapids," should be much faster than Ice Lake. The chip has seen some delays and probably won't be released until the new year. AMD also announced several big customer buy-ins for Genoa, including all the biggest cloud-infrastructure platforms and leading server assemblers.
The new specs seemed to impress tech-savvy analysts. Bob O'Donnell of TECHanalysis wrote,
With this latest generation, they (AMD) have made a huge leap in performance not only against Intel but against their previous generation... so that makes the viability of an AMD-based solution much more real.
Meanwhile, Ashish Nadkarni, data center and cloud analyst at tech research firm IDC said, "IDC expects AMD will stay on track, continue building up market share in public cloud deployments." Finally, KeyBanc analyst John Vinh issued a note today, reiterating his "overweight" rating on AMD. He also issued an $85 price target, up from about $73 at this moment, on the basis of continued cloud-market share gains through next year.
Now what
AMD is an interesting case right now. Its client segment for PCs was formerly its largest segment, but given the huge PC downturn we are experiencing, AMD recorded a stunning 40% decline in its client segment last quarter relative to the prior-year quarter.
That actually put AMD's data center segment ahead of its client segment by revenue, with the data center segment growing by 45% last quarter despite a slowing quarter for most cloud companies. Now with the unveiling of Genoa, AMD's data center segment, now arguably its most important, should get an even bigger boost looking forward.
While the macroeconomic picture is cloudy and will definitely affect AMD's sales growth in the upcoming year, as it will for all semiconductor companies, AMD's data center growth and continued market-share wins against Intel certainly do paint an optimistic picture, especially from these beaten-down levels.
