AMD Reassures On Its Chip, GPU Production Amid Intel Delays

Advanced Micro Devices Inc. (AMD) has assured investors that it is still on track to deliver its 7-nanometer (nm) chips and graphics cards (GPU) in 2020 after its competitor, Intel announced manufacturing delays.

Shares were down 2% at market close on July 28 at $67.61.

On a July 28, Q2 earnings call, AMD CEO Lisa Su reassured that there were no production issues with the difficult-to-produce, cutting-edge 7-nm chip, and other GPUs saying, “We are on track to deliver strong growth in the second half of the year driven by our current product portfolio and initial shipments of our next-generation Zen 3 CPUs and RDNA 2 GPUs that are on track to launch in late 2020.”

The assurance comes following Intel (INTC) stating on July 23 that it would see delays in the release of its own 7-nm chip until 2022. Intel CEO Bob Swan said on a Q2 earnings call that the company has “invested in contingency plans to hedge against further schedule uncertainty” and that it could involve “somebody else’s foundry.”

Intel has signed a contract with third-party manufacturer TSMC (TSM) to assist with chip production starting next year. The chip delay news overshadowed Intel’s upbeat Q2 earnings and sent ripples across the Street with Intel’s stock registering its worst drop since March with shares down 16% at market close on Friday at $50.59.

Meanwhile, AMD posted positive Q2 results on July 28 that beat estimates while providing a positive outlook with plans to sell more chips at a larger profit than previously expected. AMD reported total revenue of $1.93 billion, which was above analyst estimates of $1.86 billion.

Piper Sandler analyst Harsh Kumar said on July 27, “AMD is already on 7-nm with most of its chipsets, and the company is talking about moving to 5-nm in the next generation, which we think will be next year. Overall, we believe the Intel delays could have a strong positive impact on AMD’s market share.” He added, “In our view, AMD could move much closer to a 50/50 market share split (or even higher) versus our current thinking of maybe 35% at best.”

The analyst reiterated a Buy rating on AMD’s stock and a price target of $60, implying 11% downside potential.

AMD’s stock is up 48% year-to-date with a Moderate Buy analyst consensus that breaks down into 12 Buy ratings versus 7 Hold ratings and no Sell ratings. The $66.50 average price target suggests 2% upside potential for the shares in the coming 12 months. (See AMD’s stock analysis on TipRanks).

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