AMD's market value exceeds $100 billion thanks to 7nm advanced technology, soaring 4536% in 5 years

After last quarter's financial report exceeded Wall Street expectations, AMD recently took advantage of the victory to release a new 7-nanometer chip, which caused analysts to raise their target stock prices, encouraging AMD's stock price to hit a new high during the trading session on the 5th, and its market value exceeded US$100 billion.

Analysts estimate that as long as AMD's stock price reaches $85.18, its market value will exceed $100 billion. AMD's stock price hit this price point during trading on the 4th and 5th, rising 0.8% during trading on the 5th to $85.74 per share.

Analysts are generally optimistic about AMD's continued rise in stock prices. Vivek Arya, an analyst at Bank of America Merrill Lynch, raised AMD's target stock price to $100 last weekend. Jefferies analyst Mark Lipacis also raised AMD's target stock price from $86 to $95, and is optimistic that AMD will gain a 30% market share in the server chip market within the next three years.

AMD's stock price has risen by nearly 70% this year, mainly because its rival Intel's technological backwardness gave AMD an opportunity to take advantage. If the statistical period is expanded to five years, AMD's stock price has soared by 4536%. Intel previously encountered a technical bottleneck when upgrading from 14nm to 10nm process, resulting in a shortage of chip supply. AMD seized the opportunity to seize the market at that time. Later, Intel announced that the 7nm process would be postponed to 2022, which allowed AMD, which launched 7nm chips, to expand its influence in the PC, video game and server chip markets.

From the third quarter of 2016 to the third quarter of this year, Intel's desktop chip market share dropped from 76.6% to 51.3%, while AMD's market share doubled to 48.7%. During the same period, Intel's laptop chip market share dropped from 91.2% to 81.2%, while AMD's market share increased from 8.8% to 18.8%.

In terms of video game chips, although Nvidia has dominated the market so far, AMD has taken the lead in terms of manufacturing process. AMD's latest 7-nanometer Radeon GPU competes with Nvidia's 12-nanometer GeForce GPU and has a price advantage.

From the first quarter of last year to the first quarter of this year, Nvidia's market share in the gaming chip market fell from 77.3% to 69.2%, while AMD increased from 22.7% to 30.9%.

In addition to PC and gaming chips, analysts believe that AMD's biggest growth area in the future is the server chip market. Currently, Intel holds a 90% market share in the server chip market, but analyst Arya is optimistic that AMD's market share will exceed 25% by 2023.

AMD's attack, a few key data show the ferocity of this Cinderella

Now, the "Cinderella" story of the CPU market is still going on, and the protagonist is AMD. A report by Mercury Research, which focuses on chip market analysis, pointed out that AMD's market share in X86 has reached 18.3% and 19.7% in the client market. These two sets of data are AMD's highest share since Q4 2013 and Q1 2012 respectively. In addition, AMD also broke the historical record of market share in notebook computers. The following will explain in detail.

The growth of AMD's stock valuation last week was based on two factors: 1. AMD's excellent Q2 2020 financial report; 2. Intel's announcement of a delay in its 7nm process. Today, AMD's market value is approaching $100 billion, a new record high. Investors are already smiling, especially at AMD's performance in the server market.

Here are some numbers from Mercury Research on the current state of the x86 semiconductor market.

Since the first quarter of 2014, AMD's market share in desktop PC processors has reached an all-time high of 19.2%, a 0.6% increase from the previous quarter (excluding IoT), which means that AMD's desktop market has grown for the tenth consecutive quarter.

Intel's second-quarter earnings report showed signs of weakness in its desktop processor sales, with desktop platform sales down 14% both quarter-over-quarter and year-over-year. Throughout 2020, Intel's desktop platform revenue fell 9%, or $607 million, compared with the same period in 2019.

Meanwhile, AMD said desktop processor sales were down slightly from the previous quarter, even as its client revenue hit a 12-year high. Most of the gains came from the notebook segment. However, because AMD puts consumer processors and GPUs in the same revenue category, it's impossible to determine whether its increased revenue came at the expense of Intel. The share data suggests that while we can seemingly attribute some of Intel's losses to the impact of the coronavirus, AMD is still exerting significant pressure in the desktop PC market.

AMD's share of the notebook processor market reached 19.9%, the company's highest profit performance ever and also marked the 12th consecutive quarter of growth in the AMD notebook market.

Laptops make up about 65% of the consumer CPU market, and it's been a long, slow process for AMD. Clearly, AMD's targeted efforts are bearing fruit, with sales up 2.9% quarter-over-quarter and 5.8% year-over-year. In its earnings report, AMD announced that consumer processor sales hit a 12-year high, thanks to a 45% increase in its client computing division, with the majority of gains coming from sales of its Ryzen 4000 notebook processors. AMD's mobile processor sales doubled year-over-year, with more than 30 additional models set to join more than 50 notebook models by the end of the year. That means AMD has a solid runway for growth.

As the pandemic hit, the laptop market exploded, thanks to the popularity of working from home, so Intel's sales also increased by 9%. However, although both companies are increasing their share, AMD's share is clearly growing faster.

AMD's savvy move to move into the low-end notebook market comes as Intel struggled with shortages last year, and Intel lost a lot of share to cheap, low-margin processors as a result. Intel has invested heavily in increasing its production capacity, and Chief Financial Officer George Davis said on the company's earnings call: "We expect our share to improve through the remainder of the year as the company begins to reclaim notebook unit share with our mid- and low-end core products, which we are not yet fully meeting given the strong demand for our high-end core products."

This means we’ll see stiff competition throughout the rest of the year, especially with Intel set to release its 10nm Tiger Lake CPUs.

Comparison of AMD and Intel server market share in Q2 2020

AMD's server share forecast here is based on IDC's forecast, which only includes the single-socket and dual-socket markets, thus excluding quad-socket (and above) servers, network infrastructure, and Xeon D (edge). Mercury's data is therefore different from the numbers cited by AMD, which predicts a higher market share. AMD said: "Mercury Research examines all x86 server-class processors in its server category, regardless of the device (server, network or storage), while the estimated 1P [single-socket] and 2P [dual-socket] TAM [total addressable market] provided by IDC includes only traditional servers."

According to Mercury Research, AMD now has 5.8% of the total server market share. That's up 0.7% from the previous quarter and 2.4% from the same period last year. AMD told us it will share IDC's report soon, which is expected to get closer to AMD CEO Lisa Su's prediction that the company has finally reached its goal of a double-digit percentage of the server market. AMD also announced that sales of its EPYC server chips doubled in the last quarter.

AMD’s data center EPYC sales hit a quarterly record and doubled year-over-year, driven by $565 million in enterprise, embedded and semi-custom revenue. By comparison, Intel’s data center division had revenue of $7.1 billion last quarter, highlighting why investors are optimistic about AMD’s gains in the server market, especially given Intel’s looming process delays.

Lisa Su said AMD has achieved its goal, but has not set a new market share target. Lisa Su said at a recent investor event that the company will not forecast server CPU sales based on market share in the future, but will focus on revenue targets: "We will transition from share targets to AMD revenue growth targets because that will give you a better idea of ​​​​development. Therefore, the server business will continue to be very strategic. I may not give you a market share target again. But we did say that this data can give you an idea of ​​how big we think the business can be. A few months ago, when we did the financial analyst day, we said that the company saw the server or data center business, starting to exceed 30% of AMD's revenue."

Lisa Su pointed out in the company's earnings call that EPYC accounts for 20% of the company's revenue, or about $386 million. Apparently, AMD plans to significantly increase this percentage in the future. She predicts that the percentage of CPU usage in EPYC data centers will also increase rapidly in the second half of the year.

But Intel still commands 94.2% of the market, and recent price cuts on its Xeon processors suggest the company is willing to sacrifice profits to remain competitive. In fact, the company’s profit margins have fallen from 60% in the previous quarter to an all-time high of 53.3% (the lowest level since 2009). Intel also had strong server revenue last quarter (up 43% year-over-year) as the outbreak spurred the use of server equipment.

AMD will launch its EPYC Milan chips this year, while Intel will launch its 10nm Ice Lake Xeons, so the remaining months of the year will be a bloody battle as AMD tries to improve its position.

Still, the data is the most illustrative - AMD has 18.3% of the overall x86 market share, the highest level since the fourth quarter of 2013. In addition, AMD's current market share in client x86 has also reached an all-time high of 19.7% since the first quarter of 2012.