KeyBanc Sees 'Significant Runway' For AMD In Cloud Data Processors

Following Advanced Micro Devices, Inc. AMD’s announcement surrounding the availability on both Amazon.com, Inc. AMZN’s Amazon Web Services and Microsoft Corp. MSFT’s Azure, the company’s instance count is expected to accelerate, according to KeyBanc Capital Markets. 

The Analyst

Analyst Weston Twigg reiterated a Sector Weight rating on Advanced Micro Devices; a Sector Weight rating on Intel Corp. INTC; a Sector Weight rating on NVIDIA Corp. NVDA; and an Overweight rating on Xilinx, Inc. XLNX with a $90 price target. 

The Thesis

Intel’s Skylake remains strong in the cloud data center ecosystem, Twigg said in a Sunday note. (See his track record here.) 

The company recently added eight regions to its repertoire, increasing its penetration to 96 percent of AWS, Azure and Alphabet Inc. GOOGL GOOG’s Google Cloud, the analyst said. 

Nvidia added seven regions, including its latest Volta processor, Twigg said.

Despite the addition of only one region this year, Twigg said he anticipates four new beta program completions from Xilinx as well. 

KeyBanc's Instance Tracker shows the penetration of processor types, Twigg said.

"We expect INTC to remain the dominant processor type, but we see significant runway for AMD as it benefits from strong customer pull as well as competitive price and performance; we believe AMD could exit 2019 with over 15-percent server CPU share, up from around 1 percent currently.”

Nvidia should continue to expand across regions and is showing early traction with its new T4 processor, the analyst said. 

"XLNX remains well-positioned to gain additional share as beta programs conclude, and we remain positive on its long-term growth potential in the cloud." 

The Price Action

Advanced Micro Devices shares dropped 0.46 percent to $19.29 at the time of publication on Monday.

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