Will AMD’s 2017 Growth Story Materialize?
Star semiconductor stock Advanced Micro Devices (AMD) is going through some market correction. Its 1Q17 earnings didn’t live up to the inflated expectations of investors.
However, AMD’s short- and medium-term outlooks are still bright. It will be launching new products throughout 2017 and 2018.
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2017 revenue drivers
AMD’s semi-custom gaming chips make it a leader in the game console market. Both Sony (SNE) and Microsoft (MSFT), which together own 83% of the game console market, buy semi-custom chips from AMD. 2017 should be a slightly stronger year for AMD’s semi-custom business. Both SNE and MSFT are launching the upgraded versions of their respective consoles, which will feature advanced processors.
Although gaming processors carry lower margins, strong sales volumes should drive AMD’s revenue in 2017.
AMD is moving its semi-custom chips beyond gaming. It’s secured an order to provide a processor for a non-game console, but it hasn’t revealed the name of its new client. There’s been much speculation about this new relationship. Some rumors state that the new non-game console is for Facebook (FB), some say that it’s for self-driving cars, and some say that it’s for Apple’s (AAPL) Macbook. Some revenue from this non-game console could be seen in 2017.
Earlier in 2017, AMD announced that its high-end Vega GPU (graphics processing unit) will hit the market by the end of June 2017. The company also revealed a few features of the Vega GPU, which saw several news articles speculate that it would compete with NVIDIA’s (NVDA) GeForce GTX 1080 Ti in the PC (personal computer) gaming market.
AMD has already launched the high-end Ryzen 7 and mid-end Ryzen 5 CPUs (central processing unit), with the latter believed to be more popular than the former. The company is due to launch the Ryzen 3 CPU and the notebook variants of the above CPUs in 2H17. These releases should drive its revenue growth in the 2017 holiday season, provided rival Intel (INTC) doesn’t resort to a price war.
AMD will launch its Raven Ridge APU (application processing unit) in the low- to mid-range laptop market. As the laptop market is growing faster than the overall PC market, the product should bring strong revenue growth for the company in 2017.
Next, we’ll look at AMD’s mid- and long-term growth drivers.