Advanced Micro Devices, Inc. (NASDAQ:AMD)
Raymond James predicts that both Advanced Micro Devices and Intel will experience a positive shift in their business performance in the near future.
On Monday, recommendations were given to the two largest manufacturers of PC chips by Srini Pajjuri, who works for an investment bank. The market analyst increased his price goal for AMD stock (NASDAQ:AMD) to $115, up from $100, and boosted his price target for Intel stock (NASDAQ:INTC), up to $33, up from $30. AMD has been given a Strong Buy recommendation by Pajjuri, while Intel has been given an Outperform rating.
Both AMD and Intel base their computer processors, which serve as the primary computing brains for personal computers and servers, on the x86 chip architecture.
The global epidemic has significantly altered the ways in which we go about our daily lives, including how we learn and what we do for fun. The number of people working from home has increased, which has led to a major increase in the demand for personal computers and a subsequent surge in sales. IDC’s research indicates that during the second quarter of 2020, the global market for personal computers experienced growth of 13.1% compared to the same time period in 2019, with total shipments reaching 72.3 million units. It is anticipated that this growth will continue as an increasing number of people move toward online schooling and remote jobs.
This increase in personal computer sales is excellent news for semiconductor makers AMD and Intel, who together control the market for central processing units (CPUs). Both of these firms have seen an increase in their share prices over the past year, and many industry analysts believe that there is further potential for growth for both of them as PC sales continue to improve.
In the most recent several quarters, the personal computer industry has seen a decline in sales. According to research firm IDC, worldwide shipments of personal computers dropped 28% in the December quarter from the same period a year earlier, following a 15% year-over-year dip in the September quarter. The firm noted a continuous unwinding of the boom that occurred during the pandemic era.
After meeting with over 20 PC component manufacturers in Asia over the course of the past week, Pajjuri is optimistic that the market for computers will improve in the near future. He noted that the businesses that “we talked with in Taiwan and Korea are seeing early signs of recovery in commercial and gaming notebook/monitor orders but consumer PC demand remains sluggish.” This was in contrast to the situation in Taiwan and Korea, where demand for consumer PCs remained low.
Towards the middle of the trading day, shares of AMD slid 3.6% to a price of $94.32, while shares of Intel fell 3.3% to $28.83.
The analyst expects AMD’s PC chip revenue to grow following the March quarter as PC demand gets better. According to him, Intel should also gain later on this year from increased demand from corporations.
According to what he tweeted, “we believe the worst is behind for the majority of our coverage.” For the semiconductor stock market, we “foresee further outperformance.”
During the course of the past year, the share prices of AMD and Intel have dropped by 16% and 39%, respectively.
The Relative Positions of AMD and Intel in the Market
AMD and Intel are the two primary participants in the CPU business, and they have both benefited from the boom in PC sales. Over the course of the past year, the price of a share of AMD has increased by more than 90%, while the price of a share of Intel has increased by more than 20%. It is anticipated that this growth will continue even with the recent uptick in PC sales.
The success of AMD’s Ryzen CPUs over the past few years has allowed the company to increase its market share at the expense of Intel. Data provided by PassMark Software indicates that AMD’s market share in the CPU industry climbed from 11.7% in the third quarter of 2018 to 19.2% in the third quarter of 2020. Its rise has been driven by the popularity of the Ryzen 3000 and 5000 series processors, which offer exceptional performance at a low price.
On the other side, Intel has been going through some difficult times over the past few years. The fact that the company has had so much trouble making the switch to its 10nm technology has caused a delay in the development of its product roadmap. Because of this, AMD has been given the opportunity to gain market share, and many analysts believe that in order for Intel to maintain its competitive position, the company needs to step up its game.
Forecasts from Industry Experts
Many analysts believe that AMD and Intel both have greater potential for growth if PC sales begin to improve. In a recent note to clients, Wedbush analyst Matt Bryson raised his price target for AMD from $110 to $150, citing strong demand for its Ryzen processors. Bryson believes that AMD will be able to take market share away from Intel in the years to come.
In a similar manner, the analyst at Jefferies named Mark Lipacis increased his price objective for Intel from $63 to $80, citing an improvement in the demand for personal computers and the company’s ambitions to outsource some of its production. In addition, Lipacis believes that Intel will be able to reclaim market share from AMD in the years to come as a direct result of the company’s next 10nm chips.
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