Advanced micro-devices (NASDAQ: AMD) made impressive progress in increasing its sales of processors for servers, and took away market share Intel (NASDAQ: INTC) in the process. Its bigger competitor still dominates this niche, but things will soon get even better for AMD in 2021.
The chipmaker reportedly increased its server market share from 5% to 8% in 2019, and its share reached double-digit percentages in the second quarter of 2020. According to an article in DigiTimes, some semiconductor industry viewers expect AMD to double its server market share in 2021 and close the year with 20% of the market. While this is an ambitious prediction, you should not be surprised to see this happen: AMD is on the verge of getting Intel in more pain with its latest processors.
Image Source: Getty Images.
AMD Introduces Broad Side at Intel
AMD has finally given investors a look at its third-generation EPYC server processor – called “Milan” – based on the Zen 3 microarchitecture. While the details are sparse, as the disc maker only previewed the new processor at CES 2021, it appears that AMD is about to deliver another gut blow to Intel.
AMD demonstrated two Milan processors at CES by running a weather forecast simulation and running them against Intel’s Xeon Gold 6258R. The Milan was 68% faster than the Xeon processor in single-socket performance and also achieved the price in double-pocket performance, where it was 46% faster.
Investors should take these results with a grain of salt as it comes from the company, not an independent third party. Moreover, the CES event was only a preview, not an actual test. It would be wise to wait and see what independent testers have to say about the comparative speeds of the processors after the Milans were introduced and AMD’s claims could be checked.
But it would not be surprising to see that these upcoming AMD server chips beat Intel comfortably for a few simple reasons. First, AMD’s Zen 3 microarchitecture helped the chipmaker achieve 19% IPC (instructions per cycle) in desktop chips in the previous architecture. To put it more simply, chips based on AMD’s new platform can complete more tasks in one cycle due to a refined manufacturing process.
This brings us to the second reason why AMD may injure Intel into servers again this year. The Milan chips are based on a 7-nanometer (nm) manufacturing node, and although they are the same as the previous generation Rome chips, the Zen 3 microarchitecture has certain improvements in thermal management and a unified memory around the to remove latency. This allows the new chips to outperform the previous generation, blowing Intel’s offering out of the water while the Xeon processor that AMD spoke to in the preview was built with an inferior 14 nm process.
Intel is trying to recover some of the ground it lost to AMD with its 10 nm Xeon scalable processors, which are already in production. Chipzilla will begin the volume ramp of these chips this term. But it remains to be seen how much good it will do, as AMD has already refined its 7nm process with third-generation EPYC Milan chips, which are expected to launch this quarter.
Big financial gains in the cards
If AMD’s new chips perform in line with its demands and consequently attract more of the market away from Intel this year, it could add billions of dollars to its data center market revenue.
The chipmaker was on track to knock out $ 1.5 billion from the data center business in 2020 after generating an estimated $ 1 billion from this segment the year before. AMD estimates that the size of the server CPU market could reach $ 19 billion by 2023. A share of 20% of that would amount to $ 3.8 billion, suggesting that AMD’s data centers’ revenue could be nearly quadrupled from the 2019 level in just a few years and more than double its 2020 mark.
But AMD could also grow in the next few years and take an even bigger share of the server processor market in the next two years, as it is expected to transition to the 5nm Zen 4 microarchitecture next year. This can definitely help widen the gap with Intel. AMD can therefore still win big in the data center market by rejecting Intel’s market share. This is another reason for investors to buy this top-growth stock, which has other solid catalysts.