For several years now, Advanced Micro Devices (AMD) has eaten away at Intel’s market dominance in the CPU segment. Intel, however, with a new CEO at the helm, has been devising its comeback program.
Recently, the chip giant announced its new IDM (integrated device manufacturer) 2.0 strategy, which includes the launch of Intel Foundry Services (IFS), a new foundry business, and a $20 billion investment in two new fabs in Arizona. The news was generally well-received and indicated that the struggling semiconductor company was not about to lay down and allow its rivals to grab more market share.
However, Northland analyst Gus Richard calls Intel’s latest move a “strategic faux pas” that plays right into its CPU rival’s hands.
“We do not believe TSMC will relinquish its manufacturing lead to INTC any time soon and process technology leadership drives product leadership and GM higher,” said the 5-star analyst. “INTC expansion into the foundry market will increase AMD as a priority for TSMC and INTC will be persona non grata. For this reason, we expect AMD's market share momentum to continue.”
Richard calls TSMC the “undisputed leader in volume and process technology,” and while Intel has said it will keep on manufacturing its chips in-house, it also intends to outsource chip manufacturing to third-party foundries – TSMC included. But the analyst says its decision to re-enter the foundry market and “maintain leading-edge manufacturing capacity” means that catering to its needs will become “low priority” at TSMC once again.
In contrast, as all AMD’s and Xilinx’ – soon to be part of AMD - leading-edge volume is produced at TSMC, more wins for them means more business for TSMC.
“This will likely result in AMD getting earlier access to technology and better capacity allocation, cementing the Company's x86 process technology leadership for the foreseeable future,” Richard opined.
As such, Richard reiterated an Outperform (i.e. Buy) rating on AMD shares along with a $96 price target. The analyst, therefore, anticipates gains of 24% over the coming months. (To watch Richard’s track record, click here)
Turning now to the rest of the Street, where AMD has plenty of support. The stock has a Moderate Buy consensus rating, based on 16 Buys, 4 Holds and 2 Sells. Going by the $105.55 average price target, shares are expected to be changing hands for ~36% premium a year from now. (See AMD stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.