You can’t say that Advanced Micro Devices (NYSE:AMD) is playing second fiddle to Intel (NSADAQ:INTC) anymore. Not even in the slightest. After years of being the number two player in the personal computing revolution and dotcom days, AMD’s fate seemed sealed. It was doomed to fade away and be just a relic in the technology sector. And the AMD stock price reflected that.
But these days, it’s hard to believe that AMD stock was once a penny stock and traded for less than $2 per share.
However, thanks to some big-time innovation, smart moves and a focus on specialty computing chips, AMD is now emerging as the victor versus its rival. Advanced Micro Devices stock has surged since its dark days. Perhaps the best part is that AMD still has plenty of gas left in the tank to keep on rising far into the future.
For investors, the stock still has plenty of potential and three key drivers will help it along the way.
AMD Stock and Smartphones
AMD and Intel avoided smartphones and wireless chips when the market was in its infancy. Executives at INTC actually called it a fad that wouldn’t catch on. This allowed firms like QUALCOMM (NSDAQ:QCOM) to have the market to themselves for years. Since then, INTC and AMD have had to play catch-up. But here, Advanced Micro Devices may have an edge going forward.
The reason why QCOM has become the smartphone leader is that its Snapdragon system on chips (SoCs) have become the industry standard. SoC’s bundle a CPU, Adreno GPU, and a modem together on one chip to save space. However, many device makers have recently begun to use their own priority chipsets and SoCs to save on costs and reduce their dependency on QCOM.
This is a big deal for AMD. The firm recently partnered with leading device maker Samsung to provide the GPU portion of the SoCs on its smartphones and tablets. AMD will receive a multi-year license for its high-performance Radeon graphics solutions and technologies. In exchange, the semiconductor firm will see a steady stream of fees and royalty payments back to its bottom line.
While the exact terms of the deal weren’t disclosed, it’s a major win for AMD and could provide plenty of growth and profits over the long haul. And if it proves successful, it paves the way for other deals and additional agreements with other firms.
AMD Stock and the Cloud
It’s no secret that cloud computing has taken the world by storm. From business operations to consumer-focused apps, these days everything is operated by some data center located somewhere else. As more and more processes are sent up to cloud, data center demand continues to explode.
For AMD stock this could be win number two.
Many of AMD’s chipsets are winning in data center construction. Its EPYC server processor chips are quickly becoming standard in many centers, while its Ryzen line-up of central processing units (CPUs) operate on less power demand than rivals.
AMD is even finding a home for its GPUs in the cloud. Thanks to how they rapidly process information, GPUs have quickly become to the go-to chips in many data centers that power A.I., healthcare, science, and engineering applications.
All of this has resulted in surging revenues for AMD. Sales of data center products more than doubled year-over-year at the semiconductor firm. In fact, Mercury Research estimates that AMD’s server market share has increased from just 0.8% at the end of 2017 to more than 3.2% at the end of 2018.
Analysts now peg that AMD will court about 10% of the market by the end of this year as EPYC chip demand surges. This contrasts sharply to rival Intel- who had to cut its forecast of server chips.
For ADM, the ability to tap into growing data center demand and win is a huge driver for the stock over the long term.
AMD Stock and PCs
As we’ve said, AMD has long been the second fiddle to Intel when looking at the personal computing space. Its chips simply couldn’t compute with INTC on performance, but not anymore. It looks like AMD is quickly going to be the standard for PC market going forward.
With the launch of its third generation Ryzen chips for PC, AMD’s performance is widely better than Intel’s on a variety of metrics. Moreover, it costs significantly less for comparable Intel products. Already, Advanced Micro Devices has seen its market share in PC processors surge. Last quarter, AMD claimed around 13.3% of the PC market- up from only around 8.6% a year earlier.
But with its new chips being cheaper and better performing, AMD may finally be able to take the crown away from Intel or at a bare minimum reach parity in terms of market share. Again, these gains will result in more revenues coming the firm’s way.
The Bottom Line on AMD Stock
In the end, Advanced Micro Devices has completely turned itself around and is now one of the best buys in all of tech. AMD has plenty of levers to pull and continued rising demand for its high-performance products is a great sign that its finally gotten its mojo back.
For investors, buying AMD stock is almost a no-brainer at this point. The firm has a lot of potential and that potential is finally turning into actual results.
Disclosure: As of the time of writing, Aaron Levitt did not hold a position in any stock mentioned.