AMD’s move in three key growth areas
So far, we’ve talked about the possible impact of the cryptocurrency trend on Advanced Micro Devices (AMD). Easing investors’ and analysts’ concerns, AMD gave a statement that its long-term growth is not dependent on cryptocurrency as it’s not even its core market. The chip supplier stated that its long-term growth will come from three key markets: PCs (personal computer), professional graphics, and servers.
Proving this point is AMD’s strong implementation of its product road map.
At the end of 2017, AMD launched its Ryzen Mobile CPU (central processing unit). However, a limited number of Ryzen-powered laptops were launched at that time, with Hewlett-Packard (HPQ) being one of the early adopters. This year will witness a broader rollout of Ryzen Mobile, with over 40 new laptop systems and Ryzen Mobile Pro, which is scheduled for launch in 2Q18.
In March 2018, Dell released its new notebook models powered by Ryzen Mobile under its Inspiron brand and priced them in the higher range of $600–$1,000. This puts AMD in the high-end laptop CPU market.
Online retailers Newegg and Mindfactory also reported that AMD’s Ryzen Threadripper had claimed a 40%–50% share in the very-high-end PC CPU space, in which the only other competitor is Intel’s (INTC) Core i9 CPU. AMD plans to launch its second-generation, 12 nm (nanometer) Threadripper CPU in 2H18. It’s also preparing to launch its second-generation Ryzen desktop CPUs throughout 2018.
AMD has also entered the professional graphics market, which is dominated by NVIDIA’s (NVDA) Quadro GPU (graphics processing unit). AMD’s Radeon Pro SSG (solid-state graphics) is a unique combination of traditional GPUs and onboard memory with SSD (solid-state drive). By bringing memory closer, AMD allows GPUs to access more memory in order to improve editing capability and manipulate 8K video and 360-degree content captured in professional-grade cameras in real time.
Though video editing is relatively small in terms of unit sales, it’s a $300 million market whose margins are incredibly high. The professional graphics market is a small one of just $300 million, but it commands high margins.
Adobe (ADBE) has optimized its video-editing software to AMD’s Radeon Pro SSG, indicating that AMD has a future in the pro market.
AMD is expected to witness strong growth in the server market as its EPYC server processor and Radeon Instinct GPU for data center complete the qualification process for major cloud customers. The revenue will start flowing when the deployment begins and companies such as Baidu (BIDU) start deploying EPYC server CPU.
Stifel Nicolaus analyst Kevin Cassidy is bullish on AMD’s server opportunity and expects the company to increase its server CPU market share from 1% in 2017 to 4% in 2018. He recommends investors buy AMD and not Intel if they want to benefit from the growing demand in the data center market in 2H18. We’ll look into his arguments in the next part of the series.