Intel’s Aurora deal
Advanced Micro Devices (AMD) has secured a landmark deal with the US DoE (Department of Energy) to power the world’s fastest supercomputer, which will deliver a performance 1.5 exaflops. As part of the deal, the DoE will give $500 million to AMD and Cray for hardware and $100 million to develop specific hardware for the system.
The DoE plans to deploy another supercomputer called “Aurora,” powered by Intel’s (INTC) Xeon CPU (central processing unit) and Xe GPU (graphics processing unit) in 2021. Aurora is expected to deliver a 1.0-exaflop performance. This deal is worth $500 million. Cray will get $146 million, and Intel will get $354 million.
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Impact of a supercomputer deal on AMD’s earnings
An amount of $300 million is a huge win for AMD, which earns a quarterly revenue of $1.2 billion after combining sales of all its businesses including PC CPU, consumer GPU, data center CPU and GPU, semi-custom, and embedded. A data center win should improve the company’s overall ASP (average selling price) and boost margins. The revenue from the Frontier deal should be reflected in AMD’s 2021 revenue. Wall Street analysts expect AMD’s revenue to rise 8.4% YoY to $9 billion in 2021. The Frontier deal should increase the revenue guidance to $9.3 billion.
The Frontier deal should also help AMD secure more orders from enterprise and data center customers and probably more supercomputer deals, boosting its revenue in the coming few years. On the other hand, the $350 million Aurora deal will be just a drop in the ocean for Intel, which earns $23 billion in annual revenue from the data center segment.
AMD’s server CPU market share
According to data from Mercury Research, AMD increased its x86 server CPU unit market share from 1% in the first quarter of 2018 to 3.2% in the fourth quarter of 2018. However, its unit market share fell to 2.9% in the first quarter of 2019. AMD aims to achieve 10% server CPU market share in the next 12 to 16 months with its next-generation 7-nm (nanometer) Rome CPU. Supercomputing deals should help AMD achieve its goal.
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