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AMD Stock amid Future Earnings Growth, Market Share Gains

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AMD on track to gain market share

Advanced Micro Devices (AMD) is the hot stock that has caught everyone’s attention with its 89% rally since May 1. The stock is currently trading near its 52-week high of $20.92. It picked up pace after it released strong fiscal Q2 2018 earnings on July 25.

AMD reported better-than-expected revenue and record profits in fiscal Q2 2018, driven by a strong adoption of its high-performance CPUs (central processing units) and GPUs (graphics processing units) in PCs, gaming, and data centers.

AMD has its complete range of Ryzen, Radeon, and Epyc products in the market and is now heading to their second generation. That’s helping it gain market share from Intel (INTC). AMD’s business strategy revolves around boosting its earnings by gaining market share.

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7 nm products: AMD’s next growth catalyst

Until now, AMD was behind Intel in terms of the manufacturing process. That technology gap caused AMD to lose market share from Intel. However, that’s about to change in 2018 as AMD brings out its 7 nm (nanometer) products while Intel struggles to make its 10 nm node production-ready.

In 2017, AMD gained PC processor market share from Intel by offering CPUs that deliver competitive performance at a low price. AMD is building its second-generation server GPUs and CPUs on TSMC’s (Taiwan Semiconductor Manufacturing Company’s) (TSM) 7 nm node and plans to launch them by the end of 2018 and 2019, respectively. On the other hand, Intel has delayed its 10 nm products to the 2019 holiday season.

AMD believes that its strong product execution will help it gain mid-single-digit market share in the server CPU space by the end of 2018. While it’s doing well in the CPU market, it continues to lag behind Nvidia (NVDA) in the GPU market. However, that doesn’t impact investors much since the weakness in GPU is more than offset by the strength in PC and server CPUs.

In this series, we’ll look at AMD’s earnings and future growth potential.

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