Why AMD Stock could double again in 2021

Advanced micro-systems (NASDAQ: AMD) stock almost doubled in 2020. Market share gains versus Intel (NASDAQ: INTC) in CPU (central processing unit) space and strong sales of gaming hardware in the wake of the novel coronavirus pandemic have helped the chipmaker register impressive top and bottom growth throughout the year. year, and investors laughed all the way to the bank as a result.

But don’t be surprised to see AMD replicate its performance in 2021, as the catalysts that drove its growth in 2020 are here to stay. Let’s take a look at the key factors that could help AMD stock double once again this year.

AMD data by YCharts

AMD could become a more dominant CPU player

AMD has made huge strides in the processor market over Intel over the past year. AMD held 22.4% of the x86 processor market at the end of the third quarter of 2020, according to Mercury Research, its highest share in 13 years.

AMD has succeeded in reducing the dominance of Intel processors with its premium product line, based on a smaller manufacturing node, which allows it to provide better compute performance and lower power consumption. . For example, AMD’s recently released Ryzen 5000 series desktop processors can outperform their Intel counterparts in independent performance tests.

AMD could expand its edge in 2021, as it is expected to refine its existing Zen 3 architecture. Supply chain rumors indicate that AMD may upgrade its 7-nanometer (nm) manufacturing process to update the Ryzen 5000 series processors in the second half of the year. The gains are expected to be incremental over current-gen processors also based on a 7nm node – but Intel’s issues are likely to help AMD maintain its technology advantage.

The launch of Intel’s 10nm desktop chips (which are expected to compete with AMD’s 7nm chips) has been significantly delayed. Chipzilla offers 10nm Tiger Lake chips only on laptops, which allows AMD to run for free in the office space, where the former currently sells 14nm chips. Additionally, Intel is expected to remain stuck on a 14nm manufacturing node for most of the year, as its 10nm desktop parts are not expected until the second half of the year.

AMD should have fine-tuned its 7nm process by then and prepared to switch to the Zen 4 architecture (based on a 5nm node) in 2022. Meanwhile, Intel is expected to continue to catch up: its 7nm processors competitors are not available. t should arrive until 2023, because the chip giant is a year behind the development of this platform.

Not surprisingly, AMD is expected to significantly increase its market share for x86 processors this year. Rosenblatt Securities analyst Hans Mosesmann predicts that AMD could increase its share by 50% this year, which would be more than double what it was at the end of the third quarter of 2020. Thus, the IT segment and AMD’s chart, which delivered 47% revenue growth in the first three quarters of 2020, appears to have enough ammunition to support its hot run in the New Year.

Business and semi-personalized will walk on gas

AMD’s revenue from the semi-personalized business more than doubled in the third quarter of 2020, increasing 116% year-over-year to $ 1.13 billion. The chipmaker attributes this tremendous growth to two factors: increased sales of semi-custom chips and increased sales of server processors. The good news for AMD is that these two verticals are expected to maintain their formidable momentum in 2021, thanks to two major catalysts.

The number one reason AMD’s semi-personalized business could be on a roll this year is because of gaming consoles. The chipmaker supplies SonyPlayStation 5 and MicrosoftXbox Series X consoles, and these devices seem to be igniting the sales chart. Sony reportedly sold 3.4 million PS5 units in just four weeks and is facing supply shortages due to huge demand.

The launch of the next-gen gaming consoles is expected to result in a major upgrade cycle, with one analyst estimating the PS5 to reach more than $ 200 million in sales. That would be almost double the sales of the previous generation PS4 console. And since the PS5 and Xbox Series X have only recently launched, they are expected to see strong demand over the next few months and help AMD increase sales.

AMD’s market share gains in the server market will be another growth driver for the CESE (Enterprise, Embedded and Semi-Custom) business. Revenue from servers running AMD processors increased 112.4% year-over-year in the third quarter of 2020, according to IDC, outpacing the broader market’s revenue growth of just 2.2%.

This clearly indicates that AMD is rapidly gaining market share against Intel, currently the dominant player in the server processor market with a 93.4% market share, according to Mercury Research. But AMD quickly eroded Intel’s dominance and has the opportunity to boost its revenue by gaining more market share.

AMD estimates that the server processor market could be worth $ 19 billion by 2023. The chipmaker is on track to reach $ 1.5 billion in data center revenue this year, so it still has a lot of room for improvement in this space. Citing industry sources, DigiTimes predicts that AMD’s server market share could reach 20% by the end of 2021.

It wouldn’t be surprising to see AMD live up to these ambitious predictions with its next-generation server processor, named Milan, expected to hit the market in the first quarter of 2021. Benchmarks revealed indicate that the new processor from Milan’s server could offer substantial gains over its predecessor.

Analysts’ estimates compiled by Yahoo! Finances point to nearly 27% growth in revenue for AMD in fiscal 2021, as well as a 48% increase in earnings per share. AMD seems capable of driving this kind of growth given the different catalysts it relies on, so it could remain a top growth stock – and recreate its 2020 performance in the new year.