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Intel (INTC) took a lot of risks justifying the many delays in its 10 nm process. Yet, in today's update via the trainee's CEO, Intel has announced that efficiencies are improving and that its 10nm processor should arrive. en masse in 2019. This shortens the window of opportunity for AMD (AMD). Make no mistake – the next AMD server chip "ROME" will be good – but Intel just fired a few shots across the bow. The CPU fight is about to heat up.
Reduce the gap
A lot of my friends are talking about AMD "bridging the gap" with Intel, and while that's true, Intel has the R & D budget to overcome its short-term difficulties, with time and money. Given the overwhelming demand from Intel and the expansion of the TAM solution, we are in the long run for this cycle of results. It is not long to think that they will beat profits and the stock will increase. Combine that with a general lack of enthusiasm, and we could have a giant of society going out of a sleep.
Extended production capacity
Intel added that it was increasing its production capacity by an additional $ 1 billion by "We are investing a record $ 15 billion in investment in 2018, about $ 1 billion more than the beginning of the year. Our 14-nm production sites in Oregon, Arizona, Ireland and Israel. This capital, along with other efficiencies, is increasing our offering to meet your increased demand. "
What this means is that Intel will accelerate the production of Xeon and Core processors. You can bet that Intel is not going to sit idle and develop factories without pushing those chips out the door.
AMD response to a two-front war
In a given fight, both sides evolve and adapt situationally AMD has Ryzen 2 on 7nm which will arrive next March. This gives AMD a window of opportunity to conquer market share, but it will not be long before Intel accelerates its production process – 10nm chips. It should be noted that TSMC (TSM) 7nm is slightly lower than Intel 10nm (at least from what we read). Yet, TSMC puts AMD on two fingers. the takeaway delivery is that the 10-nm delays that would have extended until 2020 should be resolved by 2019 if everything goes as planned. (Note: 2020 has always seemed unrealistic).
Meanwhile, on the second front of AMD, Nvidia (NVDA) RTX 2050 & 2060 is expected to arrive with time. These will put pressure on the aging GPU series of the AMD Polaris 500. Rumor has it that AMD is working on an update to Polaris 3.0, but will that give them enough time while waiting for the next generation of Navi? Time will tell us.
Realistic view
Perma-bulls and perma-bears will always push an angle of "to infinity and beyond" gains or bankruptcy. As investors (or traders), we have to keep a cool head. The Intel announcement should not be unexpected. A company can only stumble a long time before solving its problems (or falling under the nose). Intel has the bankroll and relationships needed to overcome most self-inflicted injuries for quite some time. Intel will eventually put order in their home. Former AMDs Jim Keller and Raja Koduri have come to solve Intel's problems and expand into new markets. AMD simultaneously took steps to improve its GPU division.
Current events were not unexpected, and Intel will eventually find a valid CEO to fill the void. If they wanted to promote from the inside, it should have happened now. Obviously, the research is taking place outside the company and it will be interesting to see who they are buying for this task. This alone could result in a small increase in Intel's stock price once their new CEO announced.
AMD catalysts
So, what does all this mean for AMD? Frankly, the AMD processor wars will heat up a little faster than the masses thought. Ryzen 2 will be released next March and will hurt Intel. Intel will respond with its own processor – given time. The battle on the server market could be fierce, as AMD is determined to carve out a piece of the cake, and Intel has decided to let its Xeons out of the factories and end up in the hands of data centers on hold.
However, do not confuse this with sadness and misfortune. No, AMD is simply fighting Intel, and the successor to EYPC, ROME, is doing very well. Nobody wants to see Intel dominate the server processor industry. If they do, prices remain high. If the market is competitive, innovation will occur and buyers will be able to work with sellers to get better prices. Expect AMD to gain server time. On the other hand, expectations are high. AMD must have a perfect performance this quarter and win, they must meet the expectations of 5% of the server market in the fourth quarter.
How we play
Due to the current pop, we have reduced our gains in terms of earnings while keeping the implementations in case AMD decreases further. We also bought a small long position on AMD to trade with (in case AMD recovers). We sold in mid-October 30 dollars set today. They will most likely miss the benefits and decline of the third quarter if the stock does not slide lower. As we get closer to the benefits of AMD, we can open an issue to capture the extreme movements. We can open long calls in INTC closer to the INTC gains.
We believe that people will digest information and overcome the current micro implosion. On the contrary, AMD likes to go back and forth. Various powers seem to want to keep the price up thanks to an endless daily cycle of upgrades. This is a good environment in which a trader can play.
Warning: The options are dangerous. Play smartly; do not overestimate; ask a broker for advice. Imitate our cheek your own risks.
Disclosure: I am / we are short-lived.
I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I have no business relationship with a company whose stock is mentioned in this article.
Additional disclosure: We hold a small amount of AMD common stock for potential and long term trading.
We own INTC for potential profits and for commercial purposes.
We are running out of AMD via the options.
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