it’s easy to make a case for Advanced Micro Devices’ (NASDAQ:AMD) Ongoing success. In the PC compute and enterprise/cloud datacenter markets, the chip giant is seeing ongoing x86 market share gains and given its portfolio of CPU/GPU/FPGA products, the company also has a huge opportunity in accelerated compute/AI.
That said, JPMorgan analyst Harlan Sur believes that on top of all that, there’s another option for growth that has yet to be fully realized by the Street. “We believe the market continues to appreciate the large market opportunity in embedded markets (auto, industrial, retail, IoT, service provider), especially given the strong market leadership in embedded that Xilinx brings to the AMD team is,” a 5-star analyst said recently.
According to Sur, one of the advantages of the Xilinx acquisition is that the firm brought to the table its dominance in several embedded end-markets with its FPGA/adaptive compute solutions. Buoyed by AMD’s scale, the company can now use the Xilinx/FPGA leadership to drive further growth. “Cross-selling opportunities” with an embedded focused portfolio of x86 CPU products should result in further embedded market share.
Looking at the numbers, SUR sees the embedded x86 processor opportunity to currently amount to $8.5 billion per year and is projected to continue expanding at 3-5% CAGR over the next 5 years. Right now, AMD has ~5% market share, but Sur believes the near/medium term opportunity is just as large as it is in compute/AI. Similar to its current PC/datacenter market share, Sur sees AMD moving toward a 25-40% share of this market over this period, which would result in revenue growth of $2-$3B+ per year and $0.40-$0.50 in revenue Will happen. Incremental income power.
So, how does this opportunity appear for investors? OK, here’s the problem. While Sur applauds AMD’s execution, given the stock’s outperformance in 2023 — up 99% so far — the shares’ lofty valuation keeps him on the edge with a neutral rating and $92 price target. (To see Sur’s track record, Click here,
Now turning to the rest of the Street, where the stock boasts of Moderate Buy consensus rating based on 19 Buys and additional 8 Holds. However, like Sur, most of the Street views the stock as overvalued; An average target of $104.37 implies that the stock will decline by 19% in the coming year. (See AMD stock forecast on TipRanks)
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Disclaimer: The views expressed in this article are those of select analysts only. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.