The 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.

Summary:

• I am a diehard fan of Intel but I still have a long-term bet on AMD.
• The forthcoming rise of paid or subscription-based cloud video games is a future multi-bagger for AMD’s Radeon GPU business.
• My fearless forecast is that AMD can never catch up with Nvidia on GPU deep learning and data center acceleration.
• Cloud subscription gaming is nascent. AMD therefore has excellent chance of being an early leader in cloud subscription gaming.
• As of now, the video games industry is actually generating more direct revenue than GPU-based deep learning or AI acceleration.

It is inevitable. Advanced Micro Devices (AMD) has long-term benefits from Google’s (GOOGL) choice of Radeon GPUs (Graphics Processing Units) for Stadia. Google’s snob of gamers-favorite Nvidia (NVDA) GeForce is why I raised my bet on AMD two weeks ago. My takeaway is that AMD is a bargain because it is still trading at below $29. Stadia is Google’s very ambitious paid cloud-based video games platform. Stadia, with the help of AMD Radeon GPUs, wants to be a goliath version of Sony’s paid streaming games platform, PlayStation NOW.

(Source: AMD/Google)

AMD has long-term benefits if Google’s Stadia remains Radeon-exclusive. PlayStation NOW only offers streaming video games to PC and PlayStation users. Stadia’s on-demand video games subscription service will work on any device. Stadia games will be available to smart TVs, Chrome OS devices, PCs, consoles, phones, tablets, and laptops.

Stadia’s universal or cross-platform, device-agnostic approach to streaming video games will require Google to huge purchase orders of Radeon GPUs. Going forward, AMD’s GPU supply deal with Google Stadia is going to a bigger tailwind than Ethereum cryptocurrency mining than ever was.

Why Streaming Video Games Is The Netflix Growth Story

On-demand video games is now feasible because even third-world country like the Philippines now offer 10mbps DSL or 4G mobile broadband. I recently upgraded to a 10mbps PLDT DSL plan. I can attest that cloud-based (no need to install game clients) gaming is now decent here in our rural town.

My fearless forecast is that paid video games streaming will grow as big as Netflix (NFLX). The total video games industry is actually much bigger than movies and TV shows. The Radeon GPU business is why I am long on this stock. I am a proud video gamer since 1996. There are 2.4 billion gamers today, thanks to mobile phones and tablets. The estimated revenue from video games this year will be $148 billion.

Stadia (and AMD Radeon business) will service more than 2 billion Android phones, TVs, Chromebooks, and tablets. My guesstimate is that Stadia’s GPU purchases can add up to $300 to $500 million in new revenue for AMD. The bigger picture is that other streaming video games firms like Sony and Microsoft (MSFT) might also source out their GPU needs from AMD.  The upcoming rise of paid video games streaming has the probable potential to contribute up to $800m to $1 billion in new annual revenue for AMD.

GPUs Now, Gaming Processors Later?

Stadia will use Intel (INTC) processors to complement Radeon GPUs. However, I am betting that Google will eventually use Ryzen processors too for its Stadia data center/server farms. AMD only needs to come up with a Ryzen or Threadripper that can equal the gaming performance of Intel’s current Core i5 and Core i7 processors. Two or three years from now, AMD’s Ryzen processors might equal the gaming performance of Intel’s x86 processors. At the moment, gamers still prefer Intel over Ryzen for their gaming machines. This is why Google was also using Intel processors for Stadia.

(Source: Steam)

On the other hand, the long-term probability is that the CPU + GPU combo capability of AMD will eventually eclipse Intel’s gaming performance advantage within the next two years. By 2021, I expect AMD CPUs to hit 30 to 40% market share in Steam’s hardware survey.

I suspect that Stadia and other cloud streaming video games platform is likely why Intel is rushing its own data center-centric discrete GPUs. Unfortunately, I do not believe that Intel’s embryonic discrete GPU project can catch up with Radeon or GeForce within the next five years. This is why I am bullish on AMD right now. The Radeon discrete GPU IP is far superior to what Intel and Kadori can formulate within the next 3 years.

Conclusion

My fearless forecast is that 3 to 5 years from now streaming video games can generate $30 to $60 billion in annual revenue for Stadia, PlayStation NOW, and others like them. This is why I expect AMD’s stock price to reach $40 to $45 by 2023. Cloud gaming, not AI or deep learning, is AMD’s next emerging growth catalyst.

Stadia will probably end up buying 2 to 5 million units of $400 Radeon GPUs every year until 2025. This is my guesstimate to support Stadia’s expected exponential growth rate. The scenario is that sub-$200 5 to 6-inch smartphones or $199 Chromebooks can be potent streaming video games devices.

My buy rating for AMD is also partly because I Know First’s stock-picking AI has a positive 1-year forecast score for it, +56.83. This is semi-bullish forecast is important because I Know First has a high 0.75 predictability score over AMD. I Know First has a great track record of correctly predicting the 12-month market trend price pattern of AMD.

How to interpret this diagram.

Note that monthly technical indicators and moving averages trends also give a buy rating for Advanced Micro Devices’ stock. You should heed my advice, go long or raise your stake in AMD.

(Source: Investing.com)

Past I Know First Success with AMD Stock Forecast

I Know First has been bullish on AMD’s shares in past forecasts. On May 16, 2018, the I Know First algorithm issued a bullish forecast for the 3 time horizons, 30 days, 90 days and 1 year. The algorithm successfully forecasted the movement of the AMD’s shares. Until today, AMD’s shares have risen by 114.86% in line with the I Know First algorithm’s forecast. See chart below.

This bullish AMD stock forecast was sent to the current I Know First subscribers on May 16, 2018.

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Please note-for trading decisions use the most recent forecast.