- AMD has had a great run in 2016, more than tripling investors' money.
- AMD still has several catalysts that could fuel growth in 2017.
- After a stellar performance in 2016, AMD looks set for an even better year in 2017.
Sunnyvale, California-based AMD (NSDQ:AMD) has had a great run in 2016 so far. At $8.7 a share, AMD stock has tripled investors' money this year, and given the way things are shaping up for the chipmaker, 2017 could end up being an even better year. AMD just signed a deal with Alphabet Inc's (NSDQ:GOOGL) Google, and as it appears, the deal could potentially open the doors to similar deals with Amazon (NSDQ:AMZN), IBM (NYSE:IBM) and Microsoft (NSDQ:MSFT). With its upcoming line of chips due to be launched in 2017, AMD's top line numbers and market share look likely to improve. Combined with the impending benefits of the company's debt restructuring, AMD should see financial metrics improving across the board. If all goes well, AMD could have an even better year in 2017.
Google Deal Opens Up The Cloud Market
As we pointed out in a previous post, AMD's deal with Google could open up a big market for the chipmaker. Earlier this month, AMD announced a deal to put its GPUs or graphics cards in Google's cloud platforms, which would make these GPUs available to users of Google Compute Engine and Google Cloud Machine Learning in 2017. The deal is great for AMD on multiple fronts. For starters, it's AMD's first win in the deep learnings or machine learnings space, an area forecasted to grow several folds in the years to come. Further, the deal is a first when it comes to cloud majors in the US, and could potentially open the doors to similar deals with the likes of Google competitors Amazon, IBM and Microsoft.
The data center market for GPUs has been dominated by NVIDIA (NSDQ:NVDA) for a long time now. This is a huge market, which is projected to grow at a fast clip over the next few years, and AMD might have gotten its foot in the door with the Google deal. As we highlighted in our previous post, Amazon and Microsoft only offer 1 GPU, Nvidia's much older K80. Now with Google offering multiple GPUs, including Nvidia's newer P100, and pricing these services aggressively, the other biggies in the space could be tempted to neutralize Google's threat by adding AMD GPUs to their platforms as well.
AMD's Vega GPUs And Zen CPUs Could Change The Game In 2017
To further AMD's case, its upcoming line of 'Vega' architecture based GPUs are expected to be its most powerful GPUs yet, aimed at the high-end market. What's more, according to Wccftech, these GPUs could be better than Nvidia's 'top dog', the $1200 GTX TItan X. AMD CEO Lisa Su has also indicated that AMD will eventually combine its upcoming Zen CPU with a GPU based on its Vega architecture, to roll out a mega-chip for enterprise servers and supercomputing. All of this could make AMD's offerings way more compelling than they are today. And of course, the Google deal suggests that what they have on offer today isn't too bad anyway.
It remains to be seen how these plans will eventually pan out for AMD. As things stand at present though, there's no shortage of promise, and the same goes for AMD's upcoming line of Zen CPUs, which is expected to give Intel's high-end chips a run for their money. While these chips may or may not match Intel's high-end chips on every parameter, they are expected to narrow the gap and offer an alternative to those who seek one. Quoting Digital Trends:
"we are also told that AMD will also offer some overclocked, and potentially overclocking rated, chips for as much as $500. Regardless of pricing though, it sounds like this generation may be the first in a long time that can compete directly with top-end Intel chips. The eight core/16 thread configurations are said to be capable of taking on Intel’s i7-6850K, which costs as much as $600."
Debt-Restructuring Will Pay Off In 2017
AMD's move to restructure its long-term debt was a great one. For starters, it was a move that showed investors that the management was thinking long term. That it believed in the company's future, and wasn't trying to just survive. However, in the short term, the move meant higher costs. In addition to the premium AMD had to shell out to pay-off higher interest debt, the company also incurred costs related to the issuance of common stock and convertible debt, the proceeds of which it used to effect this restructuring.
While these costs will offset interest expense reductions for about two quarters, the real benefits will kick in next year, in the form of lower interest payments, and healthier bottom line numbers. With its move to restructure debt, AMD has not only reduced the debt on its balance sheet, it has also effectively locked in at lower interest rates for a longer period of time, at the bottom of the interest rate cycle.
Summing It Up
AMD has had a fabulous year in 2016, and given the catalysts it has, AMD looks set for an even better year in 2017. Following the deal with Google, which will come into effect in 2017, AMD's upcoming Vega GPUs and Zen CPUs could turn out to be game-changers for the chipmaker. While all of that takes care of top-line growth, the company's debt restructuring will help its bottom line numbers in 2017, adding up to all round improvements for AMD. All put together, AMD looks set for an even better year in 2017.
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