The market has not yet woken up to the huge opportunity in front of AMD, but when it does, expect a violent reaction to AMD's share price!
Why I’m buying AMD
Intel has a virtual monopoly in high-end x86 CPUs and Nvidia has had monstrous growth on the back on crypto and AI. Both Intel and Nvidia are leaders in their niche.
AMD competes with both of these giants. It’s share price fell from over $38 in 2005 to just over $2 in 2008, coming close to bankruptcy, and has been loss-making for more quarters than I care to remember.
Intel’s R&D budget is greater than AMD’s revenue! You’d be CRAZY to invest in AMD right?
Not so fast!
There are some strong factors at play which give AMD more than a good shot at gaining market share against Intel:
Zen cores are finally competitive.
Infinity Fabric and MCM gives AMD a yield/cost advantage.
AMD looks like it will have a process lead over Intel for the first time in years.
AMD has the best chance it has had since the Opteron at taking market share from Intel. While competition against Intel is not easy (and both Intel and Nvidia have a history of playing dirty) AMD should be able to make in-roads in the server market. Perhaps only single digit market share at first, this would already be a remarkable feat.
Intel themselves seem to be rattled and caught off-guard by AMD’s impeccable execution. Intel have rushed out new products in response, but are still hampered by their troubled transition to 10nm and will be hamstrung by the need to protect their existing juicy margins when they consider their response.
The market has not yet woken up to the huge opportunity in front of AMD, the long validation times for data centres will likely mean that the first financial impacts of this will not be seen until late 2018 or early 2019, but when it does, expect a violent reaction to AMD’s share price!
I am long AMD and expect this to be my biggest accumulating position for 2018. I’m buying around the $9-$10 range and expect the share price to go way over $20.