Intel's earnings commentary struck Wall Street as disappointing - but that sentiment hasn't necessarily carried over to rival Advanced Micro Devices.
AMD has been feeling the love lately, and heading into the company's Tuesday afternoon earnings report, investors are seemingly upbeat on its business of selling traditional server chips.
Compared to Intel $(INTC)$, its main competitor in the market for traditional server chips, "AMD has a sizable performance lead" in x86-based chips, RBC analyst Srini Pajjuri said in a Monday note. Supply constraints at Intel should also help AMD gain more market share, Pajjuri said, although he noted some competition could arise from Arm Holdings $(ARM)$, which designs the rival ARM chip architecture.
Pajjuri is expecting a beat-and-raise report from AMD, driven by server-chip momentum. AMD's stock closed up 4% on Monday and extended its gains around 2% in the after-hours session.
AMD competes with Intel when it comes to selling server central processing units and is up against industry giant Nvidia (NVDA) when it comes to selling server graphics processing units. And while AMD has so far fought an uphill battle to gain meaningful share of the market for GPUs, the opportunity in server CPUs is rapidly growing.
That means investors could devote less attention to its competitive rivalry with Nvidia, Bernstein analyst Stacy Rasgon wrote last week.
Overall, the chip maker is expected to report adjusted earnings of $1.32 per share on revenue of $9.7 billion for the December quarter, according to analysts tracked by FactSet. The company's data-center revenue is expected to come in at $5 billion for the fourth quarter.
In the current quarter, analysts are anticipating adjusted earnings of $1.23 per share on revenue of $9.4 billion, according to the FactSet consensus.
AMD also competes with Intel in the personal-computer chip market, where demand appears healthy for now, Pajjuri said. However, rising memory-chip prices could end up denting growth there in the latter half of the year, he added.
While AMD's CPU momentum is the hot story of the moment, investors still will be interested in what's ahead for AMD's GPUs, particularly as it concerns the company's partnership with OpenAI.
Pajjuri said he expects the company to reiterate its timeline for the ramp of its Instinct MI455 GPUs and Helios rack-scale offering for OpenAI, which is expected to start in the latter half of this year, even as wafer supply remains tight. He thinks management has "solid conviction into the initial [gigawatt] of OpenAI opportunity." AMD said in October that it plans to deploy 6 gigawatts' worth of its systems with the AI startup to support its data-center buildout.
Bernstein's Rasgon said the company's "AI efforts have admittedly come a long way" - but with OpenAI as the only meaningful customer for Helios so far, the company's AI story depends on how that partnership progresses, and whether AMD can add more major customers for its first-ever rack-scale offering.
