Today, Advanced Micro Devices (AMD) stock rose 4% to over $32, making it one of the top Nasdaq gainers. Joining AMD were Micron and NVIDIA, which rose 3.9% and 2.8%.
Several positive factors played out for AMD stock today:
- The Morgan Stanley analyst upgrade.
- Positive signs for US–China trade talks.
- A prolonged Intel supply shortage.
All three factors revived investor confidence in the stock ahead of the third-quarter AMD earnings, due on October 29. AMD stock rose 12.8% between October 10 and 21.
Morgan Stanley raises AMD stock price target
Morgan Stanley analyst Joseph Moore increased his price target for AMD to $32 from $30. He thinks Advanced Micro Devices will gain market share next year.
According to The Street, Joseph Moore noted that AMD will see new opportunities in “IP licensing, semi-custom chips, cloud gaming, and supercomputers.” These opportunities should reflect in AMD’s 2020 earnings. And the company is expected to gain share in all its end-markets—PCs, servers, semi-custom, and graphics.
AMD to gain share in enthusiast desktop segment
In the PC space, the Morgan Stanley analyst believes AMD will have less of an impact on enterprise and mainstream desktops. But Moore thinks the company will see its biggest gains in the enthusiast desktop segment.
AMD offers 12-core Ryzen 9 3900X CPUs for the higher-end mainstream market. The company increased production of this CPU in response to higher demand. AMD also plans to launch its 7nm (nanometer) Ryzen Threadripper CPUs for enthusiasts and the Ryzen 9 3950X in November.
Wccftech, citing German website Hardwareluxx, said an insider source revealed that Intel’s 10nm process will skip desktop CPUs. The next node upgrade in desktop CPUs should come in 2022, when Intel launched 7nm desktop CPUs.
AMD’s EPYC to benefit from supercomputing and the large-scale cloud
In the server space, Morgan Stanley’s Joseph Moore stated that AMD will see the biggest gains in the largest-scale cloud service providers. But, Moore says, it will see less of an impact on smaller server customers and OEMs (original equipment manufacturers).
AMD stock hit a 13-year high in early August, when Advanced Micro Devices launched its 7nm EPYC Rome server CPU. Since then, the Rome has achieved several performance milestones and been adopted by many companies. AMD even won its first supercomputing contract for Frontier in May.
Plus, AMD aims to achieve 10% server CPU market share. And DigiTimes, citing market observers, thinks the company could exceed a 10% share in 2020.
AMD taps the cloud gaming space
In the data center graphics space, Moore stated that AMD will see the biggest gains in cloud gaming. AMD Radeon data center GPUs (graphics processing units) will power the Google Stadia cloud gaming platform due to launch on November 19.
2020, an important year for AMD semi-custom
AMD is a leader in the game console market. The company’s semi-custom chips power Sony’s PlayStation and Microsoft’s Xbox.
Next year, Sony and Microsoft are due to launch their next-generation game consoles, the PS5 and Project Scarlett, after seven years of development. These next-generation consoles will be powered by AMD’s semi-custom chips. AMD’s 2020 earnings will see significant revenue and earnings growth in the semi-custom segment.
Advanced Micro Devices has fired on all cylinders with its Ryzen, EPYC, and Navi products. The company is now looking to make the most of its 7nm lead. Any improvements in the US–China trade war and Intel’s CPU supply shortage would boost AMD’s earnings from these new products.