AMD is stealing market share from Intel, and it’s not stopping now

Intelligence‘s (NASDAQ: INTC) the upturn in the x86 CPU (central processing unit) market at the end of 2020 is now seen as a flash in the pan. Intel had given investors hope that it could end Advanced micro-systems‘ (NASDAQ: AMD) steady gains in market share by ramping up production and responding to customers who were unable to purchase their chips due to a supply shortage, but the latest figures from Mercury Research prove otherwise.

AMD captured Intel’s x86 market share in Q2 2021, with its share now near all-time highs. The bad news for Intel investors is that AMD has not finished eating away at “Chipzilla’s dominance. Let’s see why.”

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AMD wins big thanks to the server market

According to Mercury Research, AMD held 22.5% of the overall x86 processor market at the end of the second quarter, its highest share in the past 14 years. AMD’s share rose 4.2 percentage points year-on-year and 1.8 percentage points from the first quarter. Intel held the rest of the market.

AMD’s market share gains were primarily driven by the server market. The chipmaker’s server market share increased 3.7 percentage points from a year ago to 9.5 percent in the second quarter. This is not surprising, as AMD’s latest generation of EPYC server processors are said to be much faster than Intel’s offerings. AMD had claimed that its third-generation EPYC processors offered double the performance of their Intel counterparts.

These claims translate into real gains. AMD’s EPYC server chips are gaining prominence in the world’s top 500 supercomputers. The chipmaker supplied 59% of processing cores to new supercomputer systems in the top 500 list in June 2021, up from 46% in November last year.

Additionally, AMD noted in its July earnings conference call that demand for server chips had accelerated due to “the growing adoption of internal workload and nearly 50 new instances powered by AMD by Amazon Web Services, Microsoft Azure, Google, Tencent and Ali BabaThe company further added that business demand for its server processors is expected to accelerate as more than 100 systems powered by its third generation EPYC servers are in production from Dell, Hewlett Packard Enterprise, Lenovo, Supermicro, Cisco, and others.

More importantly, AMD’s relentless pursuit of market share in the server market should get a boost when it launches its fourth-generation EPYC server chips, named Genoa, based on a process next year. manufacture of 5 nanometers. The fourth generation server chips are expected to contain a maximum of 96 cores compared to 64 cores in the current generation chips, which indicates a nice increase in performance.

Meanwhile, Intel announced at the end of June that the launch of its next-generation Sapphire Rapids server processors was postponed to the first quarter of 2022. Intel’s next-generation server processors will be based on a 10nm manufacturing process, which means Chipzilla will be at a disadvantage when AMD launches its 5nm processors. This is because a smaller node size will allow AMD to integrate more transistors and lower power consumption, which will result in a higher number of cores and higher computing power.

The good part is that AMD’s share of the server processor market is still quite small, with Intel controlling just over 90% of the space last quarter. This allows AMD to make big gains in this space in the future thanks to its technological advantage. Bank of America Analyst Vivek Arya sees AMD’s server market share grow to 25% over the next 12-18 months, which would be more than double current levels.

Measure financial gains

AMD predicts a total addressable market worth $ 19 billion in server processors by 2023. The company’s data center business (which is mostly server chips in 2020) has captured a share significant part of its total turnover last year. AMD had generated $ 9.76 billion in revenue last year, which means that server processors produced less than $ 2 billion of its total sales (assuming the data center segment produces 19% of total revenues).

If AMD continues to capture 25% of the server processor market by the end of 2022 as predicted by Bank of America, its revenue from this space could more than double (based on the addressable market figure mentioned above. ) over the next two years. More importantly, AMD’s server growth rate and product roadmap indicate that it can effectively capture a quarter of the server processor market and increase its revenue.

Add AMD’s gains in the laptop and desktop processor markets, and it’s no surprise why the company’s revenue and profits are expected to explode in the years to come.

AMD Revenue Estimates for Current Year Data by YCharts

All in all, AMD is sitting on several catalysts that could help it remain a growth stock going forward, and investors would do well to buy it now given the steep drop in its share price over the course of the year. the last two weeks.