The semiconductor industry has been in a downtrend since 2018, but one stock that has emerged as a winner among its peers is Advanced Micro Devices (AMD). AMD rose 79.6% in 2018, while the VanEck Vectors Semiconductor ETF (SMH) fell 10.8%.
AMD was stuck in a sell-off that sent the stock down 22% in December 2018. However, it recovered slightly by 7.2% in the first nine days of 2019. Many analysts and investors are optimistic about the stock and pessimistic about the semiconductor industry.
On January 4, tech investor Paul Meeks told CNBC that he expects AMD stock to rise 50% within the next three years, which equates to $28 by 2022. He is optimistic about AMD, as he expects the company to gain some share in the server CPU (central processing unit) market from Intel (INTC) and some share in the gaming processor market from NVIDIA (NVDA). Because AMD is a small player in these markets, it has ample room to grow by picking up market share.
To increase its share in the PC, server, and gaming markets, AMD is launching next-generation CPUs and GPUs (graphics processing unit).
AMD’s announcements at CES 2019
The chip industry measures chip circuits in nanometers (one-billionth of a meter). The smaller the chip size, the better the performance and power efficiency. Until recently, Intel was the technology leader with the most advanced process node. However, a three-year delay in its 10 nm node allowed AMD to overtake Intel in terms of process node production.
At the 2019 Consumer Electronics Show, AMD announced its 7 nm CPUs and GPUs, which set the stage for its growth in 2019. The company’s CEO, Lisa Su, announced the world’s first 7 nm desktop GPU, Radeon VII, which marks its entry into the high-end gaming segment. She also announced AMD’s third-generation Ryzen CPUs built on 7 nm nodes, which will compete with Intel’s ninth-generation CPUs. She stated that AMD is on track to ship its first 7 nm EPYC server CPU in mid-2019.
In this series, we’ll look at the above product announcements and what they mean for investors.