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Microchips and Advanced Micro Devices
Thursday, the chipmaker succeeded in turning around a long-term bear after accelerating its market-share gains in server processors at the expense of rivals.
Intel.
Citigroup
Analyst Christopher Danely upgraded AMD shares (ticker: AMD) from Sell to Neutral, and raised his price target to $95 from $17—a 459 percent increase.
For the first time in 15 years, Danely said in a Thursday letter that his team’s checks indicate AMD is gaining market share from Intel (INTC)–gaining 1.5 percent in the first quarter. He expects the improvements to continue, with AMD achieving a 20% market share by the end of 2022, near to the company’s previous high point. According to Citi’s estimates, AMD had a 2.5 percent share of server multiprocessing units at the start of 2019. He predicted that AMD’s market share increases will persist at least two years, owing to ongoing production issues at Intel, among other factors. According to the expert, Intel’s next-generation production technology would be delayed. Because semiconductor makers normally raise their profit the longer a chip is made, production delays are anticipated to reduce Intel’s margins.
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Danely offers a pairs trade for those who believe in his thesis: underweight Intel stock while overweighting AMD shares. A pairs trade often comprises two securities with inversely linked movements: an investor shorts one and buys the other. The hazards of such a swap, according to Danely, include Intel’s manufacturing troubles being resolved sooner than planned and AMD’s server chips being delayed. Danely had previously justified his low AMD target price by predicting that Intel will engage in a price war with AMD, crushing AMD’s inroads into Intel-dominated markets. Danely said that a price war in central processor units is still likely, and that it will start when personal computer sales slow and Intel’s market share losses grow. Despite Danely’s upbeat assessment of AMD—and a videogame hardware announcement employing the company’s chips—shares sank 2.4 percent to $86.93 at the end of the regular session. Intel’s shares fell 1.3 percent to $55.81 amid broader industry weakness, particularly chip companies, after the company’s earnings report.
Taiwan Semiconductor Manufacturing (Taiwan Semiconductor Manufacturing)
(TSM) announced earnings before the market opened on Thursday. The
Semiconductor Index PHLX
The price of the stock dropped by 2.2 percent. Max A. Cherney can be reached at max.cherney@barrons.com./n
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