The technological advantage of AMD compared to Intel is here to stay

Since January 2018, the stock of AMD (Advanced Micro Devices) has increased by 210% and continues to grow, making it a disruptive factor in the technology sector. Many analysts and media reports have discussed the factors behind the rise in inventories. Among them are its new product launches, Intel (INTC) and NVIDIA (NVDA) market share gains and the 7 nm (nanometer) technological advantage.

At the same time, some analysts have warned about the limited upside potential of the stock in the current macroeconomic environment. The trade war between the United States and China has a negative impact on final demand and fears a recession.

Positive and negative factors guide AMD's stock price dynamics. However, the evolution of the last two years shows that the risk / reward ratio is high for this stock. The stock fell 9% in 2017 but then rose 80% in 2018 and has risen 70% since the beginning of the year. Investors hope to gain a share of the market for its central processing units (CPUs).

The recently launched AMD EPYC Rome processor beats Intel's Xeon processor in terms of price and performance. AMD CEO Lisa Su was hoping to gain a double-digit market share of 10 percent in the server processor market compared to the current mid-digit share. The current scenario looks like a repeat of the scene from 2005, when AMD launched its Opteron server processor and conquered a 24% market share in June 2006. At that time, AMD action had surged 137% to exceed 40 USD in just one year. . But then, Intel took over and took almost all of AMD's market share, causing heavy losses for the latter.

However, the new AMD is very different because it does not have the technical limitations of the AMD 2006. The new AMD is a competitor feared by Intel.

AMD back in 2006

AMD is a provider of x86 processors and GPUs for PCs, servers and integrated processors for game consoles. In 2006, it manufactured chips in its own manufacturing facilities, called "fabs". However, because of its small size and limited resources, it could not compete effectively with Intel in the architecture and manufacturing process nodes. This caused AMD to lag behind the technology and slowly lost market share to Intel. In 2016, AMD held less than 1% of the server processor market.

AMD has suffered several years of losses. In 2012, it split its manufacturing branch into an independent company called GlobalFoundries. It has entered into a platelet supply agreement with GlobalFoundries. The agreement required AMD to purchase wafers only from GlobalFoundries, unless the latter failed to meet the requirements of the first. The agreement did not help much, as AMD was still behind in terms of competition between the manufacturing nodes. But this is no longer the case with the new AMD.

The new AMD has the opportunity to choose its foundry partner

In August 2018, AMD was released from its platelet supply contract as GlobalFoundries pulled out of the 7nm node race to focus on specialized process technologies. Su took the opportunity to switch to TSMC (TSM) for all its 7 nm chips. At that time, TSMC was at its technological peak and for the first time surpassed Intel's process node technology. Intel has fallen behind due to a delay of three years on its 10 nm node.

Before we continue, let's see what the process nodes are. With each node reduction, the number of transistors on a chip increases, thus improving its performance. Costs are also reduced because a smaller size means that more chips can be manufactured on a 300 mm (millimeter) slice. TSMC has already intensified its production at the 7 nm node and has accelerated its work on the 5 nm node. Even Intel has accelerated the development of its process nodes, but it will take years for the chip maker to catch up on TSMC.

The freedom to choose a foundry partner has given AMD the flexibility to quickly deliver products based on advanced process nodes. It has launched its processors and GPU Navi 7 nm Ryzen and EPYC Rome in the last two months. On the other hand, Intel has only launched its 10nm notebook processors and it has no more 10nm products in sight for 2019. This gives AMD a technological edge. a year on Intel, during which it can aim to conquer market share.

The new AMD has adopted a strategy to offer better performance at lower prices to gain market share. Its EPYC Rome processor beats Intel's Xeon Cascade Lake Platinum 8280 performance while saving $ 3,000.

The technical advantage over Intel is here to stay

TSMC's technology roadmap and AMD's flexibility in choosing a foundry ensure that history does not repeat itself. The technological advantage of AMD is here to stay. Intel can only catch up and stay competitive. This new trend has strengthened AMD's investors in the future of the company. As a result, the stock increases even during the slowdown of semiconductors.