Company Reports

We maintain our $145 fair value estimate for narrow-moat Advanced Micro Devices after the company announced a definitive agreement to acquire privately held ZT Systems for $4.9 billion. Strategically, we think the deal is reasonable as it will provide AMD with expertise in artificial intelligence infrastructure systems and services. We agree with AMD, Nvidia, and others that suggest that AI is a systems problem that is more complex than merely buying the best AI graphics processor off the shelf. We think the inclusion of ZT’s design enablement and services business will make AMD a bit more competitive with Nvidia, as we think that the latter’s strength stems at least in part from selling full AI solutions, including software and networking. However, we don’t view this deal as a tectonic shift in the AI landscape, and we still foresee AMD carving out only a sliver of the total AI pie over time.

Narrow-moat Advanced Micro Devices reported solid second-quarter results and provided investors with a healthy third-quarter forecast, highlighted by the firm’s upbeat commentary around its artificial intelligence graphics processor, or GPU, business. We maintain our $145 fair value estimate and view shares as fairly valued. While we’re pleased to see the firm lift its 2024 AI GPU revenue outlook to $4.5 billion from $4.0 billion, we’re not altering our long-term AI GPU forecast too much and acknowledge the wide range of outcomes for the fast-moving AI GPU industry.

Narrow-moat Advanced Micro Devices reported solid first-quarter results and provided investors, in our view, with a decent second-quarter forecast. However, we suspect some investors were hoping for a higher forecast for AMD’s budding data center graphics processing unit business for artificial intelligence. Shares fell 8% afterhours and approached our unchanged fair value estimate of $145 per share. We anticipate that AMD will take a piece of the AI GPU pie. Its revenue coming from a brand-new business is quite impressive in absolute terms, but we don’t see many signs that AMD will reach parity with Nvidia in AI GPUs soon.

Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers, artificial intelligence, and gaming. We consider AMD to be one of two notable firms in graphics processing units, which are especially well suited for AI. The company may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.

Narrow-moat Advanced Micro Devices reported solid fourth-quarter results, but we consider the firm’s first-quarter forecast to be a mixed bag. We raise our fair value estimate for AMD to $145 from $125, thanks to more optimistic long-term data center revenue assumptions, but after a 78% increase in share price in the past three months (versus 16% for the Morningstar Global Markets Index), we still view shares as overvalued.

Narrow-moat Advanced Micro Devices reported solid third-quarter results but provided investors with a fourth-quarter outlook that fell short of our expectations, due to struggles within its embedded business. More importantly, AMD provided insight into its artificial intelligence accelerator growth trajectory, expecting $400 million of revenue in the fourth quarter and over $2 billion in 2024. These forecasts were below our prior estimates, but we don’t consider them to be a huge disappointment either, and it’s quite possible that such estimates could be conservative. We still think AMD will emerge as the number two player in merchant AI semis, behind only Nvidia. We trim our fair value slightly to $125 from $130, based on lower long-term gaming and embedded growth assumptions, but shares still appear cheap.

Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers, artificial intelligence, and gaming. We think Advanced Micro Devices benefits from intangible assets across a variety of products. Meanwhile, Advanced Micro Devices is one of two notable firms in graphics processing units, which are especially well suited for AI. Advanced Micro Devices may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.

We maintain our $130 fair value estimate, narrow moat rating, and Exemplary capital allocation rating for Advanced Micro Devices, as we continue to like the firm’s chances of carving out a decent position in the artificial intelligence accelerator chip market in the years ahead. With shares trading near $106, we view AMD's shares as undervalued.

Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers, artificial intelligence, and gaming. We think Advanced Micro Devices benefits from intangible assets across a variety of products. Meanwhile, Advanced Micro Devices is one of two notable firms in graphics processing units, which are especially well suited for AI. Advanced Micro Devices may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.

Narrow-moat Advanced Micro Devices reported solid second-quarter results and gave investors a healthy outlook for the rest of 2023. We’re most encouraged by the firm’s disclosure that its artificial intelligence customer engagements “grew by more than seven times sequentially,” as the firm is poised for a strong ramp of AI graphics processing units starting in late 2023 and into 2024. We remain optimistic about Advanced Micro Devices’ chances to emerge as a second source to Nvidia in GPUs in AI training and inference. We maintain our $130 fair value estimates and view shares as fairly valued.

We are raising our fair value estimate for narrow-moat Advanced Micro Devices to $130 from $115, to reflect the firm’s significant growth opportunity ahead as it capitalizes on favorable trends in data centers, artificial intelligence, and gaming. We’re optimistic about future investments in data center and artificial intelligence products, as evidenced by rival Nvidia’s exceptional near-term outlook and the excitement around ChatGPT and large language models. AMD’s shares rose about 10% on Thursday in concert with Nvidia, but we still view AMD’s shares as modestly undervalued.

Advanced Micro Devices designs an array of chips for various computing applications, and in our view, is well positioned to prosper from a host of favorable trends in data center, artificial intelligence, and gaming. We think AMD benefits from intangible assets related to its x86 instruction set architecture license and chip design expertise, which gives us confidence that the firm will generate excess returns on capital to warrant a narrow economic moat rating.

AMD reported first-quarter results consistent with our expectations thanks to strong data center and embedded (Xilinx) revenue. Despite ongoing PC weakness, tepid enterprise demand, and elevated inventories at cloud customers, we remain positive on AMD’s data center business. We expect AMD’s latest 5-nanometer Genoa server CPUs to enjoy robust market share gains at Intel’s expense in the coming quarters. Shares of narrow-moat AMD are undervalued relative to our unchanged fair value estimate of $115 per share. During after-hours trading, shares were down nearly 7%, which we attribute to weak second-quarter guidance. Nevertheless, we anticipate strong double-digit revenue growth for AMD in the second half of 2023, led by share gains in the data center segment and a modest recovery in PCs.

Advanced Micro Devices designs an array of chips for various computing applications. These products include central processing units and graphics processing units tailored to PCs, game consoles, and servers. AMD operates in the x86-based duopoly with Intel that dominates the PC and server CPU markets. We think AMD benefits from intangible assets related to its x86 instruction set architecture license and chip design expertise, which gives us confidence that the firm will generate excess returns over its cost of capital over the next decade and thus warrants a narrow economic moat rating.

AMD reported fourth-quarter results ahead of our expectations thanks to strong data center and embedded (Xilinx) revenue. Although the firm corroborated Intel’s expectation of continued PC weakness and slightly elevated inventories at cloud customers, we remain positive on AMD’s data center business. We expect AMD’s latest 5-nanometer Genoa server central processing unit family to drive further market share gains at Intel’s expense. Shares look attractive relative to our unchanged fair value estimate of $115 per share, as we believe the market is overly concerned about weaker PC and gaming sales while discounting the rosy data center prospects for narrow-moat AMD.

Advanced Micro Devices designs an array of chips for various computing applications. These products include central processing units and graphics processing units tailored to PCs, game consoles, and servers. AMD operates in the x86-based duopoly with Intel that dominates the PC and server CPU markets. We think AMD benefits from intangible assets related to its x86 instruction set architecture license and chip design expertise, which gives us confidence that the firm will generate excess returns over its cost of capital over the next decade and thus warrants a narrow economic moat rating.

Advanced Micro Devices reported third-quarter results consistent with its negative announcement on Oct. 6. Revenue of about $5.6 billion was well short of management’s original guidance of $6.7 billion due to weakness in the PC market. We had been anticipating a slowdown in PC sales following robust demand in recent years from COVID-19-induced work- and learn-from-home trends. Nevertheless, the firm’s data center business continues to execute well with on-time product launches (including the upcoming 5-nm Genoa server CPU lineup) and we expect continued market share gains as Intel struggles with delays to its Sapphire Rapids server CPU family. Shares look attractive relative to our unchanged fair value estimate of $115 per share for narrow-moat Advanced Micro.

Advanced Micro Devices announced preliminary third-quarter results after the Oct. 6 close that included revenue of about $5.6 billion, well short of management’s original guidance of $6.7 billion. The primary driver of the shortfall was weakness in the client PC segment (down 53% sequentially and 40% year over year to $1 billion). We had been anticipating a slowdown in PC sales following robust demand in recent years from COVID-19-induced work- and learn-from-home trends. However, AMD had been gaining market share at Intel’s expense, which had enabled it to grow despite a weaker overall PC market. After incorporating the softer third-quarter results and lowering our fourth-quarter revenue assumptions, we are reducing our fair value estimate for narrow-moat AMD to $115 per share from $130.

Advanced Micro Devices designs an array of chips for various computing applications. These products include central processing units and graphics processing units tailored to PCs, game consoles, and servers. AMD operates in the x86-based duopoly with Intel that dominates the PC and server CPU markets. We think AMD benefits from intangible assets related to its x86 instruction set architecture license and chip design expertise, which gives us confidence that the firm will generate excess returns over its cost of capital over the next decade and thus warrants a narrow economic moat rating.

Advanced Micro Devices, or AMD, reported its 11th consecutive quarter of double-digit revenue growth primarily due to robust server sales and inclusion of recently acquired Xilinx. We are most impressed with the firm's execution on its product roadmap, particularly with its EPYC server CPU family that continues to gain share at Intel's expense. Management reiterated its prior full-year guidance for top-line growth of 60%, which includes Xilinx as well as continued share gains across its PC and server CPU products. Despite the strong results, shares fell 7% after-hours. We think the market was expecting an increase in management’s full-year revenue guidance based on Intel’s weaker-than-expected second-quarter results and guidance. Shares of narrow-moat AMD trade at an attractive discount relative to our unchanged $130 fair value estimate.