There is no doubt that Advanced Micro Devices (NASDAQ: AMD) has pulled off a successful turnaround in recent years. The…
There is no doubt that Advanced Micro Devices (NASDAQ: AMD) has pulled off a successful turnaround in recent years. The company has regained a certain market share from Intel (NASDAQ: INTC) on the PC market with Ryzen and on the server market with EPYC, and the cryptocurrency boom gave its graphics business a very necessary boost. AMD is profitable again, although recent demand for cryptocurrency is likely to bottom out.
AMD has an opportunity in 2019 to underestimate Intel on price and win high-end market share from graphics card leaders NVIDIA ] (NASDAQ: NVDA) . Intel’s flagship eight-core i9-9900K PC processor goes for a lot of $ 529 in retail, and NVIDIA significantly increased its prices with its RTX 20 series graphics cards. AMD made two major announcements at CES 201
9 that set the stage for a potentially big year.
AMD’s processors have lost Intel’s very long time in single-thread performance. It is an important performance measurement – it means more than the core number for all applications that cannot fully utilize many cores. PC games, for example, generally cannot use more than some cores effectively. These cores must be as fast as possible.
Before Ryzen was AMD miles after Intel. The company’s Bulldozer processors were a disaster, giving Intel a huge single-handed advantage. Ryzen closed this gap considerably and the second generation of Ryzen closed it further.
AMD announced the third generation of Ryzen at CES. In a live demonstration with performance testing tools Maxon Cinebench R15, an eight-core Ryzen chip managed to compare performance to Intel’s I9-9900K while using 30% less power. How these new chips work across the entire spectrum of PC workloads will not be clear until third-party reviewers put them to the test, and it won’t happen for a while. AMD plans to launch in mid-2019.
Based on this demo, AMD can completely shut down the performance gap with Intel while using much less power. It is impressive if it is related to a larger amount of workloads. The chips are built on a 7 nm manufacturing process and use AMD’s new Zen 2 micro architecture.
Pricing is unknown at this point. The top-wave mainstream second-generation 2700X Ryzen chip sells for $ 329, a whole $ 200 less than Intel’s most common flagship. AMD’s third-generation Ryzen chips are likely to be more expensive, given the advanced manufacturing process. But there is much room for AMD to underestimate Intel.
While the first two generations of Ryzen managed to strengthen AMD’s position in the PC CPU industry, the third generation could be a home run.
AMD’s last attempt to break back into the graphics card market did not go so well. AMD’s two Vega graphics cards, launched in 2017, used much more power than comparable cards from NVIDIA. They were a takeover game, and they failed to make a blow in NVIDIA’s advanced domination.
AMD tries again with Radeon VII, announced at CES and available on February 7. The graphics card is built on a 7 nm process, and it provides significant performance gains over previous Vega chips. At $ 699, it’s the same price as NVIDIA’s RTX 2080.
AMD’s own reference values show comparable performance for the RTX 2080, but Radeon VII is likely to be significantly more power-hungry. And the RTX 2080 features NVIDIA’s dedicated ray tracing hardware, enabling compatible games to produce more realistic graphics using the computationally intensive technology. The good-looking technology is part of the reason why NVIDIA increased the prices of its RTX series, and that is something that Radeon VII lacks.
Unlike AMD’s new Ryzen chips, Radeon VII does not look like a home run. It may be the best bet AMD has made this year on the high-end graphics market, but NVIDIA’s dominance doesn’t look like it’s a lot of risk.
AMD is expected to report its fourth quarter earnings at the end of this month. Cryptocurrency bust, and the subsequent surplus graphics card, have undoubtedly damaged AMD’s performance. AMD expects revenue to grow by just 8% the year before, and it may end up being too optimistic.
The third generation of Ryzen could drive faster growth in the second half of 2019, but the stock already prizes quite a bit of optimism. Analysts expect AMD to produce $ 0.46 in adjusted earnings per share for 2018 and put the price ratio over 40. Analysts see revenue growth of just 6.3% by 2019.
AMD does all the right moves on the CPU side of its business . The new Russian chips will be successful as long as they are priced right. But that does not mean that the stock is a particularly good investment, given the high valuation.