New CPU’s Market Share Gains Could Be Limited to Supply Issues

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For the past few years, Advanced Micro Devices (AMD) has been a real thorn in Intel’s side, increasingly taking CPU market share away from the historically much bigger rival. In the meantime, the gap has closed, and AMD is now looking to further cement its status in the computer server market.

On Monday, the chip giant launched the 3rd generation EPYC server CPU – code named Milan. Built on TSMC’s 7nm process (same as the second-generation Rome), and featuring AMD’s Zen 3 microarchitecture, Milan should display a significantly better instructions per clock (IPC) performance. Cloud, Enterprise and HPC customers should also benefit from Milan’s enhanced security features.

Moreover, across certain HPC, Cloud and Enterprise workloads, Milan has displayed more than double the performance capabilities of 14nm Intel server CPUs.

AMD believes that this year, across all generations of EPYC, the number of cloud instances will likely double, from 200+ 1st/2nd generation instances to more than 400 instances in total.

By the end of 2021, the company also anticipates 100 new OEM server platforms will be using the third gen EPYC.

Following the launch, J.P. Morgan analyst Harlan Sur noted, “AMD continues to deliver meaningful improvements to its server CPU platform and appears poised to expand across customers and workloads.”

The analyst added, “We anticipate AMD benefitting from strong market demand and from new workloads on EPYC 3. Based on 3rd party data, AMD had about 8- 9% share of the x86 server CPU market and we believe AMD will likely be on track to gain 2-4 percentage points of market share this year and likely into next year,”

That said, the analyst believes upside could be “limited,” due to industry-wide supply constraints.

What’s more, Intel is expected to launch its Ice Lake server lineup sometime during the second half of the year, for which Sur anticipates there will “strong demand.” Intel will also have an advantage as it not likely to be supply constrained.

To this end, Sur sticks to a Neutral (i.e. Hold) rating for AMD shares, alongside a $100 price target. You might as well call Sur’s rating a Buy, however, as the upside here comes in at a decent 21%. (To watch Sur’s track record, click here)

Overall, most analysts remain in AMD’s corner; based on 14 Buys vs. 6 holds and 1 Sell, the stock qualifies with a Moderate Buy consensus rating. With an average price target of $104 and a change, investors stand to take home 26% gain, should the target be met over the next 12 months. (See AMD stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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