Advanced Micro Devices (“AMD”), Inc. is an American multinational semiconductor company based in Santa Clara County, California that develops computer processors and related technologies for business and consumer markets.
AMD has been gaining a lot of attention recently, with their share price more than doubled just in 2019. Its Ryzen product is a winner.
The main growth story I believe in is that it might overtake Intel completely and become the main Company in the PC CPU market. While Intel has maintained a small advantage when it comes to single-threaded performance, important for any application that doesn’t scale well with core count, AMD third-gen Ryzen offers a better value proposition for a wide variety of PC users.
I myself follow the PC industry from time to time out of interest in computers. From there I noted that from a consumer standpoint, AMD has been providing better value for money products in the recent years. My current PC runs on AMD Ryzen as well. Granted there is still some association for paying a premium for Intel products for assurance on reliability, but eventually AMD will be able to chip away at Intel’s market share in the coming years.
There is currently not much changes in the GPU market. NVIDIA is still the leader, although AMD is not too far in the second place. However, AMD has sold more GPUs than NVIDIA, which signals a preference towards AMD products moving forward.
Website: Advanced Micro Devices Stock Is Growth Engine in 2020 and Beyond
Apple is reportedly planning to announce plans to power its Mac computers with its own processors instead of Intel chips. From a fundamental point of view, this means sales of Intel will decrease, and the cycle will begin for Intel as below:
From this point of view, the fall of a major competitor will allow the inverse to happen for AMD. AMD will be able to significantly improve their products and gain more market share over the next few years. This can be seen with the improvement in the recent operating cash flows in 2019 as compared to the previous years as AMD slowly gained market share.
The main reason why 2019 is a good year for them is because their products have significantly gain recognition in that year. As the environment continues to improve for AMD, eventually I believe they will be the top market player in this industry.
In the short run, I acknowledge this does not look sustainable as it is only 1 year. Thus we will need to take a step back and analyse if they are able to continue to generate the same cash-flow for the upcoming quarters.
Website: Apple reportedly plans to ditch Intel processors in Macs — here’s why that’s a big deal
Key tings to note
Intel will not sit still
That is right. Intel is a key concern. As of 2020, AMD has managed to outpace Intel in many major aspects. However, I believe Intel will not sit idly and let AMD enjoy the market share. It will take a few years of out performing Intel in order for AMD to be recognized as the top player in the PC CPU market. Intel also has a strong balance sheet to be able to expand and improve their current products. I will not count Intel out yet, as there can easily be technology breakthroughs and allowing these giants to out-compete with each other.
Economic headwinds
The economic slowdown will result in less disposable income of the general population. Introducing a high quality product at a premium price does not directly translate to higher revenue if there are no sales.
To put this into perspective, Apple recently introduced a new budget phone. This is to target consumers who have relatively less income. Although such a strategy taken by Apple was decided before Covid-19, it highlights the necessary action to take when disposal income falls which is whats happening as unemployment continues to increase around the globe.
Website: Apple launches $399 budget iPhone after coronavirus delay
Conclusion
In this article, I mentioned Intel quite frequently although this is supposed to be an article about AMD. The reason being that the market is already highly saturated and there are no new untapped markets for AMD to venture into with relation to this aspect. Intel needs to under-perform in order for AMD to continue to grow.
As of today, most of the tech stock have already reached their all time highs since the March 2020 lows. I am one of the opinion a major correction will occur soon. When that happens, I believe AMD will be worth to take note of in the future given its potential to seize market share.
