AMD Stock: AMD’s Stock Still has Upside Potential

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First


AMD Stock

  • In spite of the huge +52.29% one-day run, Advanced Micro Devices’ stock price could still go higher this year.
  • The joint venture with Tianjin Haiguang Advanced Technology Investment Company will help AMD compete in China’s server chip industry.
  • The Middle Kingdom is the world’s fastest region for server chip sales.
  • In addition to supplying processors to the upcoming PlayStation 4 NEO and Xbox One Slim, AMD will also supply the CPU/GPU inside the Nintendo NX console.
  • The 14-nm Polaris 10 and Polaris 11 GPUs will help Radeon steal market share from Nvidia this year.
  • I Know First published a bullish  Algorithmic forecast for AMD predicting its recent movement

In accordance to I Know First Algorithmic forecast from the 20th of April 2016, Advanced Micro Devices’ (AMD) stock posted its biggest one-day run-up last Friday, April 22. AMD’s price shot up by +52.29% to close at $3.99. The market ignored the fact that AMD again posted a loss in its latest quarterly earnings. Retail and institutional investors went bullish on AMD because of its new joint venture to produce x86 server processors in China.

amd stock

(Source: Yahoo Finance)

I expect AMD’s stock to further increase in price later this year. My biggest reason for this is that Intel (INTC), who has more than 90% market share in x86 server chips, did not protest this third-party licensing move of AMD. I suspect Intel is terrified of offending the Chinese government. THATIC is most probably a new government-sponsored firm that was set up precisely to get access to x86 processor designs.

As a financially-constraint company, AMD could also possibly license its x86 processor technology to include desktop PC products. Intel’s overall business in China could really suffer if AMD allows more Chinese OEMs to use its x86 processor technology.

The joint venture in China will likely use AMD’s new 14-nanometer x86 Zen chip design. Intel’s latest Xeon server processors are all made using the 14-nm process. Consequently, the Chinese partners will therefore also require AMD to provide them with its latest server processor design. Starting this year, AMD x86 Opterons are based on the new “Zen” core design.

amd stock

(Source: AMD)

The 40% more instructions per clock improvement on Zen core processors is perfect for high-density microservers. Zen server chips from AMD could also support up to 32 physical cores – which is again a highly desirable feature for microservers.

amd stock

(Source: AMD)

China Is A Growth Market For Server Chips

AMD will get $293 million in cash for licensing its x86 server processor technology and System-on-Chip designs to Tianjin Haiguang Advanced Technology Investment Company (THATIC). THATIC-made x86 server chips will definitely get priority orders from Chinese-owned companies and government firms.

It is reasonable to presume that THATIC could achieve $300 million in annual sales within its first year of operations. If THATIC can come up with significantly cheaper and more energy-efficient x86 server chips, Intel could lose many of its data center clients in China.

Consequently, AMD will reap greater royalty fees from a robust server business inside China. Even Qualcomm (QCOM) established a joint venture to try and penetrate the lucrative Chinese market for data center processors. However, AMD’s joint venture with THATIC will likely succeed better than Qualcomm’s.   Qualcomm’s ARM-based server chips are still years away from receiving mainstream adoption. Intel’s success in China is due to that country’s huge dependence on x86-based server racks.

Chinese firms are also unlikely to spend too much money porting their existing mission-critical software to the ARM architecture.

AMD Still Owns The Console Market

CEO Lisa Su also hinted that AMD is on track to receive $1.5 billion in semi-custom chips orders from console makers. Microsoft (MSFT), Sony (SNE), and Nintendo are all sticking with AMD-made CPU/GPU for their next-generation console products.

As long as Nvidia is shut out of the console market, AMD can weather any further decline in its PC-centric x86 processor sales. The gaming console market will remain strong for many years to come.  I actually expect AMD to earn more than $1.5 billion in semi-custom sales in the next three years. Consoles are no longer simple gaming machines. They are connected TV boxes used for web surfing and online video streaming.

The advent of virtual/augmented reality and 4K gaming will also require Microsoft, Sony, and Nintendo to order more custom CPU/GPU from AMD. Smartphones and tablets will never be as powerful as gaming consoles when it comes to processing virtual reality-centric content.

AMD is the clear leader in Virtual Reality GPUs. AMD is supplying the GPUs for Facebook’s (FB) Oculus Rift and HTC’s Vive VR headgears.


My 12-month price target for AMD is $4.50. AMD is doing all the right moves to keep its business alive. Aside from stronger server chip and semi-custom CPU/GPU sales, I expect the new Polaris 10 and Polaris 11 GPUs to steal market share from Nvidia GPUs. The 14-nm Radeon video cards should help AMD recover from its setbacks against NVidia’s dominance in discreet desktop/laptop GPUs.

The DirectX 12 advantage of AMD’s Polaris will help it gain more industry support. The Polaris 10 and Polaris 11 GPUs will launch this Q2 2016. PC manufacturers will have enough time to ship out Polaris-equipped PC products for the school opening this August, and for the December holiday shopping period.

amd stock

(Source: AMD) 

I Know First is a FinTech company that created an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 3,000 markets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies. In essence, the algorithm generates a with a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts the results of these predictions are shown on a daily basis on the I Know First website.

My buy endorsement for AMD’s stock is also supported by the positive algorithmic forecasts of I Know First from Friday 22nd right before the big jump of AMD stock. AMD’s 12-month algorithmic forecast is strongly predicting that it will have a higher stock price than $3.99. The 1-month and 3-month forecasts for AMD also hints that this stock is unlikely to drop back to below $3.00 soon.

amd stock

The I Know First Algorithm successfully predicted in the past the AMD stock movement published in this SWOT Analysis from the 20th of March, 2016. In the 1 month forecast given by the algorithm, we can see a strong bullish signal of 259.07 and a predictability of 0.4. Together in just 1 month the stock price went up by more than 36%.

amd stock