AMD's upcoming line-up of Ryzen CPUs could steal market share from Intel, driving AMD stock higher in 2017.
Shares of Advanced Micro Devices Inc (NASDAQ:AMD) had a fairytale run in 2016 delivering blockbuster returns of almost 290%. On the other hand, Intel Corporation (NASDAQ:INTC) had an uneventful 2016, with stock price remaining flat for the most part of the year. Now, AMD needs more high potential opportunities to continue its bull run in 2017. And if you go by the additional information shared by AMD about its upcoming Ryzen series at CES 2017, it appears as if this opportunity could come at the expense of the Chipzilla. With Intel also debuting its Kaby Lake chip last week, battle lines are clearly drawn. The Chipzilla's latest chip launch did not excite the enthusiast community much, but AMD's Ryzen chip created some sort of buzz at the CES. Is AMD in pole position to gain in the Intel-dominated PC and datacenter processors space in 2017? Let's take a closer look.
Will Ryzen Help AMD To Eat Into Intel's Territory?
With more than 80% market share, Intel dominates the PC market, which is the second largest end market for the chip maker. AMD is Intel's closest competitor with a market share of less than 20%. PC demand has been on a downward spiral since 2011, but according to a Market Realist report "Gartner expects PC sales to remain flat between 2017 and 2019". The report also states that though the demand for traditional PCs and laptops is falling, the demand for premium variants like ultramobile and two-in-ones is on the rise. This trend has helped Intel's Client Computing group to post substantial profits. Intel has dominated this space for long, but it looks like things are set to change with the launch of AMD's Ryzen series.
At CES 2017 AMD revealed more enthusiast focused information about its upcoming Ryzen series. These latest disclosures have the enthusiast community excited and optimistic about its success. A wccftech report states that "All Ryzen CPUs will have unlocked multipliers and will feature full overclocking support on X370 and B350 chipset AM4 motherboards. This will perhaps make them the most potent gaming chips in their class, especially considering Intel’s entire i5 and i3 lineups are locked". The report comes out with details of how AMD's budget offerings are better equipped than Intel's offerings. Intel's Kaby Lake series debut hasn't impressed the enthusiast community, and the company's i3 series, with overclocking, is yet to come. And though we'll have to wait till Intel's i3 and AMD's Ryzen eventually hit the market, AMD looks set to gain in the budget segment.
A PCWorld report states that almost all Ryzen CPU's will be overclockable and have a four-year life cycle. Given AMD's targeted four-year life span, Joel Hruska of ExtremeTech opines that unlike Intel, which introduces "new CPU architectures in one product cycle and new manufacturing nodes in the other, AMD intends to implement an aggressive series of tweaks and improvements to the current core as time goes by." He is also of the view that the Ryzen series will have meaningful improvements at least in overall power efficiency, performance, and performance-per-watt.
Quoting Joel Hruska on AMD's chances against Intel:
" With Intel’s CPU performance largely stuck and performance gains relegated to single-digit increases year-on-year, there’s a great deal of excitement for Ryzen. Even if it doesn’t seize the pole position from every price point, there’s pent-up demand for strong parts at good pricing."
His post also talks positively about AMD's premium offerings. These insights suggest that in 2017, AMD could take a large bite of the booming premium ultramobile and two-in-ones PC market where Intel has beaten AMD hands down. (See Also: Will 2017 Be Another Blockbuster Year For Advanced Micro Devices, Inc (AMD) Stock?)
AMD to Challenge Intel's Data Center Dominance?
A Market Realist report states that "Deutsche Bank analyst Ross Seymore expects the datacenter space to be the fastest growing semiconductor segment in 2017, reporting a rise of 10%". In this space, Intel has around 99% market share. In 2017, AMD is also set to launch its datacenter offerings. With so much initial positive buzz about the company's Ryzen series, AMD's Zen server CPU is seen as the most probable candidate to close in on Intel in the datacenter segment. So, any gains in market share in this space will be a positive sign for AMD, given the profit potential, as highlighted in this Seeking Alpha post.
Further, according to recent reports, AMD, ARM (NASDAQ:ARMH), Huawei Technology, International Business Machines (NYSE:IBM), Mellanox Technologies (NASDAQ:MLNX), and Qualcomm (NASDAQ:QCOM) have collaborated with Xilinx (NASDAQ:XLNX) to build a homogenous interface for different CPUs to share data with FPGA accelerators, which are useful in the datacenter and deep learning space. If this collaboration is successful, it could be very bad news for Intel.
Putting It All Together
In Q3'16 Intel made $8.9B in revenue from its PC and mobile computing division, whereas AMD made just $472M in revenue from its graphics and computing division. If AMD were to succeed in increasing its PC market share even by 5%, its computing revenue would more than double AMD's Q3'16 revenue from this division. AMD stock would require new catalysts to soar higher in 2017. And that new catalyst could come in the form of AMD's market share gains in the PC segment with its Ryzen series of CPUs. Any success in the datacenter segment would be an additional tailwind for the AMD stock. With so much initial positive buzz about AMD's Zen series, 2017 could be the year where the company's PC division makes meaningful profits if Zen CPUs become a success. In all, its a good time to be bullish on AMD stock and wait for the launch of AMD's ZEN CPUs, which are expected to arrive in the first half of 2017.
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