While shares of multinational semiconductor manufacturer Advanced Micro Devices Inc. (AMD) have slumped this week on cryptocurrency fears, one team of analysts on the Street sees further upside ahead for the Sunnyvale, Calif.-based company based on details of its new server chip and intent to jump into a more advanced manufacturing process. (See also: AMD Is a Sell, Positioned to Crash 70%: Citigroup.)
Cannacord Genuity analyst Matthew Ramsay, who maintains a buy rating on shares of chipmaker AMD, along with a $20 price target, writes that while “roadmap execution and competitive risk remain, we believe risk/reward is still tilted toward the upside.”
Four Chips in One
After attending AMD’s presentation at the Hot Chips conference in Cupertino, Calif., in August, the analyst reflected on his own research on AMD’s sales trends. Diving into details of the company’s new Epyc server chip, wherein AMD made the controversial decision to string four separate chips in place of one larger chip, Ramsay suggests while there may be “corner cases” where the approach is beaten out by Intel Corp.’s (INTC) single-die Xeon chip, AMD’s decision choice is an overall positive for the firm. Canaccord highlights the chip’s benefits in terms of “roadmap simplicity and chip yields,” as AMD estimates 41% cost savings in a four-chip 32-core packaged versus a single 32-core Epyc chip.
While the investment firm does not anticipate AMD to compete “across the full breadth of Intel’s server stack or at all price points,” analysts believe that estimates for $1.15 billion in server revenue by 2020 are “quite realistic and conservative.”
Ramsay also remains upbeat on AMD’s push to a 7-nanometer manufacturing process for its chips in 2018 as it skips out on the 10-nanometer node that many of its rivals are moving to, indicating “7 is the new 10.” (See also: Buy Micron, Everspin, Sell Intel, AMD: Stifel.)