AMD Anticipates Long Term Market Share Gains In Client Computing And Data Center: Analyst

Benchmark analyst Cody Acree maintained Advanced Micro Devices Inc AMD with a Buy and raised the price target from $93 to $103.

Late last week, Acree spent about an hour speaking with Ruth Cotter, AMD’s Senior VP of Marketing, Human Resources, and Investor Relations.

Cotter provided a significant amount of color to the more prominent topics of AMD’s belief in its long-term market share gains in the Client Computing market and the Data Center and Embedded processing markets.

At a high level, AMD noted that it is operating within rapidly shifting demand trends in its Client Computing, Gaming, and Data Center markets, most of which started positively through the first half of 2022, which was then followed by significant softening of customer demand throughout the second half of last year, and this weakness has now become even more persistent in the first couple months of 1Q23.

However, even considering the market’s softer beginning of 2023, AMD remains highly optimistic regarding its market share gains. Within the broader computing market, it’s not surprising that AMD expects continued softness through the first half of 2023.

AMD expected its low point of Client shipments to be in the March quarter, followed by relative stability in the June period, plus AMD is predicting a much stronger 2H23.

AMD is focused on the premium portion of the desktop and notebook markets, targeting leading OEMs like Dell Technologies Inc DELL, Lenovo Group Ltd LNVGY, and HP Inc HPQ. 

As AMD attempts to size the excess level of the channel inventory and is presently shipping at about 10% below consumption, the company currently estimates there to be about 7-8 weeks of excess inventory in the channel.

AMD expects to earn a growing revenue base from these Enterprise OEMs over the next few months. Regardless of the near-term budget adjustments, AMD envisions it will be able to grow its Data Center business by 20% annually in 2023.

Regarding the company’s gross margin potential, AMD sees the most significant element driving its gross margin results is simply product mix, with its lowest ASPs and gross margin contribution coming from its business with North American Hyper-Scale Cloud vendors.

Price Action: AMD shares traded higher by 2.384% at $85.09 on the last check Tuesday.

Photo by cebbi from Pixabay