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AMD Q2 Earnings Preview: Chipmaker Grabs Market Share On Intel Weakness

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJul 27, 2020 09:52AM ET
www.investing.com/analysis/amd-q2-earnings-preview-chipmaker-grabs-market-share-on-intel-weakness-200531961
AMD Q2 Earnings Preview: Chipmaker Grabs Market Share On Intel Weakness
By Investing.com (Haris Anwar/Investing.com)   |  Jul 27, 2020 09:52AM ET
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  • Reports Q2 2020 results on Tuesday, July 28, after the close
  • Revenue expectation: $1.85B
  • EPS expectation: $0.16

It is, perhaps, one of the most exciting times for Advanced Micro Devices (NASDAQ:AMD) investors. The Santa Clara, California-based chipmaker is seeing powerful momentum as demand for its products increases. This occurs at a time when the path to growth at one of AMD's largest competitors, Intel (NASDAQ:INTC), is faltering.

AMD Weekly TTM
AMD Weekly TTM

Shares of AMD surged on Friday, up 17% after Intel announced it is considering outsourcing chip manufacturing, after years of delays that have hindered it from bringing its next generation products to the market. AMD stock closed at $69.40.

These multiple setbacks faced by the world’s largest chipmaker have helped rivals, including AMD, catch up on performance and capture the largest share of the market. After Friday’s jump, AMD stock is up more than 50% this year, while Intel was trading 15% lower.

Intel’s current best technology, known as 10 nanometer in the industry, was scheduled to appear in 2017 and is only now making it into high-volume production. And when Intel reported results on Thursday, it said the next iteration—7 nanometer—would be delayed by a year.

AMD, on the other hand, is benefiting from persistently strong demand for personal computers, data centers and gaming consoles. AMD is the second-largest maker of chips used in computer graphics cards.

Array Of New Products

To get its growth cycle going, AMD also introduced a large array of new products last year, targeting its biggest competitor, Intel.

With these releases, the chipmaker showed it was in prime position to snatch the competitive edge from Intel. As well, it indicated it had the clout to win the biggest customers in the cloud computing market—companies that previously had little option but to rely on Intel’s expensive products.

Microsoft’s Xbox Series X and Sony’s PlayStation 5—each will contain a powerful AMD processor. Demand for such products is likely to expand as the holiday season approaches, along with the COVID-19 pandemic forcing people to continue to remain at home.

While the pandemic has complicated AMD’s production cycle after the virus shut down much of the personal computer supply chain in Q1, the company still expects annual sales growth of about 25%.

“While demand indicators across commercial, education and data center infrastructure markets are strong, we expect some softness in consumer demand in the second half of the year depending on how overall macroeconomic conditions evolve,” Chief Executive Officer Lisa Su said on a conference call in April.

AMD has said it’s targeting double-digit market share in servers by the middle of this year, after dropping to less than 1% before introducing new products in 2017. Server computers are the backbone of corporate networks and the giant data centers that run the internet.

Bottom Line

AMD shares look a bit expensive after its powerful rally in 2020. To keep this momentum going, the company has to show it’s leading the game and well-positioned to take advantage of Intel weakness. Tomorrow’s earnings report could very well support this bull case.

AMD Q2 Earnings Preview: Chipmaker Grabs Market Share On Intel Weakness
 

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AMD Q2 Earnings Preview: Chipmaker Grabs Market Share On Intel Weakness

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Comments (9)
Jeremy Williams
Jeremy Williams Jul 27, 2020 7:06PM ET
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So intel more profitable and 1.23 eps. Amd expected .16 yet Amd near 70 and intel at 50. Am i missing something?
Samoeut Sun
Samoeut Sun Jul 27, 2020 7:06PM ET
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AMD will be in the new PS5 and XBOX. Also, PC gamers prefer the AMD chips over Intel. Just look up PC builds on YouTube, everything is all AMD now. NVidia still holds the favorite for GPU but now it might change with AMD's new CPU/GPU combo chipset.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Jul 27, 2020 7:06PM ET
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Jeremy Williams
Jeremy Williams Jul 27, 2020 7:06PM ET
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Samoeut Sun ok i get that but with an expected .16 eps how is the price of the stock justified?
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Jul 27, 2020 7:06PM ET
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That's a very logical question but it seems that those eps are not being taken into account. Look at Tesla, it beat its expectations by way far and then it fall. Nasdaq has become very unpredictable, it seems fundamental has more impact on stock prices instead of technical. AMD in just one day surged to 71.63 because Intel had disappointed its investors. Netflix also beat its expectations and it fell because it is believed that in Q3 less subscribers will join the platform. Go find out 🤷‍♂️. What I do know for sure is that AMD is joining big tech companies so in the near future I see a 3 digit stock price.
Ameenscript Fx
Ameenscript Fx Jul 27, 2020 7:06PM ET
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Eps is just a financial indicator. The share price is depend on supply and demand. It seems that people are willing to buy at more premium for AMD compared to Intel
Matt Butler
Buywall Jul 27, 2020 4:58PM ET
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it tends to pull back after a major rally, which is what I'm positioned for
yui yui
yuiyui Jul 27, 2020 2:36PM ET
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AMD manages to create a buzz around their new Ryzen chips.As in the past, always offering value to the power hungry. Intel plays their strategic position very skillfully and will be coming around the corner at some point
Constantin Marius Nedelcu
Constantin Marius Nedelcu Jul 27, 2020 1:39PM ET
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Buy or Sale is Shakespeare!
Carmen DeAngelis
Carmen DeAngelis Jul 27, 2020 1:39PM ET
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Short sale
Carmen DeAngelis
Carmen DeAngelis Jul 27, 2020 1:39PM ET
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It should pull back I think some people want to take some profits
Phuong tran
Phuong tran Jul 27, 2020 1:23PM ET
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me worl
Villain Bey
Villain Bey Jul 27, 2020 1:07PM ET
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Too much China exposure 26%...im doing a put for fun...
Jeremy Williams
Jeremy Williams Jul 27, 2020 11:54AM ET
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Please. Nothing will support this stock price unless your looking 10-20 years ahead.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Jul 27, 2020 11:54AM ET
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You must be joking, right? A company which will be part of PlayStation 5, new xbox console and for the upcoming Samsung galaxy devices has nothing to be supported? Maybe you should start doing a little bit more research buddy.
Luke InTx
Luke InTx Jul 27, 2020 11:54AM ET
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ditto and failed statement since AMD at $2.00
Sagar Dhanak
Sagar Dhanak Jul 27, 2020 10:26AM ET
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you're amazing sir
victor pedroza
victor pedroza Jul 27, 2020 6:59AM ET
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don't forget the smaller Companies they also play a role.
 
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