The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

AMD Stock Prediction

Summary:

Due to the debt-laden years of Advanced Micro Devices, Intel has captured 99% of the x86 server processor market.

After achieving more than 24% market share in server-class processors in 2006, AMD gradually lost to Intel’s Xeon products.

Server-class processor offer very high margins. Zen Server processors slated for release in Q1 2017 could boost AMD’s stock.

Getting 10% of the $13.9 billion server chip market could boost AMD’s annual revenue by more than 32%.

Based one on the one-year algorithmic forecast, AMD has a Buy rating.

The H1 2017 release of Zen Server processors could be a bigger catalyst than the Polaris GPU for Advanced Micro Devices (AMD). While AMD successfully pushed sub-$300 14-nanometer Polaris GPUs this year, the margins on those products aren’t that great.

Next year, I expect AMD to start making an impact on the server chip industry again. My fearless forecast is that AMD could breach $10 next year if Lisa Su keeps her promise to launch Zen Server processors by Q1 2017. Below is a picture of a server-class AMD Zen Naples CPU/motherboard reference design.

(Source: Anandtech)

It might be smart to go long on AMD now before the new server-class processors are released this year. Zen Server processors might be the saving grace of AMD in the server market. A 32-core Zen Server System-on-Chip has its benchmark scores leaked two months ago.

Coming up with new 14-nanometer Zen server-class processors could help AMD regain its former glory in the server chip market. Ten years ago, AMD had almost 25% of the x86 server processor market. Today Intel (INTC) owns 99.2% of the x86 server processor business.

AMD getting back 10% of the $13.9 billion/year server chip market will already be a massive catalyst. Ten percent means $1.39 billion new annual revenue. AMD’s FY 2015 revenue was only $3.99 billion. Zen Server processors could boost AMD’s annual revenue by more than 32%. This potential 2017/2018 scenario will definitely inspire investors to again rally behind AMD like they did this year.

The Zen Server is therefore a vital product for AMD next year. It could dictate whether AMD will go below $5 or go above $10 next year. Lisa Su should make sure there won’t be a postponement of the Q1 2017 commercial launch date.

It’s Time The World Gets An Alternative To Pricey Intel Xeon Chips

AMD took a lot of debt when it bought ATI Technologies for $5.4 billion. Debt payments likely forced AMD to cut down on Research & Development. As a result of this, Intel’s Xeon processors got developed faster and AMD’s Opteron server chips quickly lost customers. It has been a long time coming but Zen Server might be AMD’s ticket toward disrupting Intel’s Xeon server business.

The Geekbench chart below told me that AMD finally has a potent equalizer against Intel Xeon server-class chips.

(Source: Primate Labs)

The Naples Class or AMD Corporation Diesel-codenamed Zen Server chip could help AMD get more than 1% of the x86 server market. AMD could price it reasonably to instantly attract Xeon customers. It is no secret that Intel Xeon processors are so pricey because they have had zero competition over the last five years. AMD releasing affordable server-class processors next year could encourage budget-constrained small and medium companies to abandon the Intel Xeon.

Image Is Everything

My fearless forecast is that AMD could get 5% market share in server-class servers next year, and 10% by 2018. Five percent of a $13.9 billion/year market is already $695 million. AMD adding $695 million in new revenue could be enough catalyst to push the stock to $10.

The stock market is all about image building. Institutional investors will really appreciate it if AMD can deliver a Zen Server processor that could diminish the 99.2% market share of Intel. It doesn’t matter much if AMD again loses money next year.

AMD’s release of the long-delayed 14-nm Polaris GPU earlier this year made its stock the star performer among tech tickers. Investors did not mind that AMD is still a money-losing company. They just reacted very positively that AMD finally came up with a competitive GPU product against Nvidia’s (NVDA) GeForce video cards.

(Source: Google Finance)

Looking at the chart above, it is clear to me that investors are more in love with money-losing AMD than INTC this year. This is in spite of Intel making billions of dollars in quarterly profit. I say let us invest in tickers that are the current darlings of the stock market.

Conclusion

Six or seven months from now, investors will likely push AMD beyond $9 after Zen Server chips get their official commercial launch date. It is likely more profitable for AMD to sell $1,000++ Zen Server processors than $250 Radeon RX 480 video cards. AMD could end up profitable next year if it could take 5 to 10% share in the server chip market.

I am also sure that Intel will not abuse its contra revenue tactic in the server chip market. AMD already won a $1.25 billion settlement from Intel in 2009. That was due to the antitrust case that AMD filed against the unfair trade practices of Intel. My fearless forecast is that companies who can’t afford the $3,200 price tag of the Intel Xeon E7 will try the more affordable AMD Zen Server chip.

Based on the long-term, one-year algorithmic forecast of I Know First, AMD is also a good stock to invest in now. The market trend score is very high, 159.33. Likewise, the predictability score is also high at 0.44.



I Know First Pass Success With AMD

I Know First has been bullish on AMD in past forecasts. On August 29th, 2016, I Know First published a quick win by the algorithm, acknowledging the tremendous growth AMD had in accordance with the algorithm’s bullish forecast. The return for the 1-year forecast is described below. To read the full article relating to the past forecast, click here.

Furthermore, on April 24th, 2016, an I Know First analyst wrote a bullish article regarding AMD and its upside potential, in accordance with our state of the art algorithm. Since then, AMD has risen by almost 180% to date.

This forecast was sent to current I Know First subscribers on April 22nd, 2016. To subscribe today Click here.