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AMD’s deal with Amazon.com gives the chip maker the chance to take some server-chip market share from rival Intel.
Photo:
Richard James Mendoza/Zuma Press
Advanced Micro Devices
has shown it has a rightful place in the cloud. The next trick will be showing it can stay there.
The chip maker announced an important new deal with
Amazon.com
’s
cloud service on Tuesday. Under the arrangement, customers of Amazon Web Services will be able to choose a handful of services that use AMD’s newest line of processors. AMD has existing relationships with other big cloud-service providers including
Microsoft
,
Oracle
,
Baidu
and
Tencent
.
But AWS is the undisputed leader of the public cloud industry, now generating more than $23 billion in trailing 12-month revenue compared with an estimated $8.4 billion for Microsoft’s Azure.
Amazon, in other words, is an important win for AMD. It gives the chip maker a fighting chance in its quest to finally take some market share from rival
Intel
Corp., which has long controlled about 98% of the server-chip market. Intel’s struggles with developing a new manufacturing process have delayed the next generation of its server processors until early 2020. AMD, meanwhile, will have its latest server chips on the market next year based on the newest production processes at partner
Taiwan Semiconductor Manufacturing
Co.
Timothy Arcuri of
UBS
estimates AMD will account for about 17% of server chips sold by 2021.
That ultimately will be the decision of the businesses that use services like AWS. They will have to select the services run by AMD’s chips which will, in turn, spark more sales of those chips, as Amazon would need to keep pace with demand. It is an uncertain outcome that will depend greatly on AMD’s ability to sell its newest capabilities. Analysts have given initial high marks to the latest line of chips, which should help the company in its sales efforts.
But investors still need to be patient. AMD’s stock price ran up prematurely when Intel’s troubles became apparent three months ago, only to fall back to where they started following last month’s brutal tech selloff and a disappointing third-quarter report from the company.
AMD’s latest big break following the recent selloff should create conditions for gains if their chips catch on in the cloud.
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