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Shares of Advanced Micro Devices (NASDAQ:AMD) may have even more upside according to one analyst who found that the chipmaker is continuing to erode Intel's market share in the desktop CPU space.
Baron's cited Christopher Rolland of Susquehanna Financial Group saying that he believes AMD has captured 25% of the desktop CPU market worldwide thanks to its Ryzen central processing units.
AMD to continue growth outlook thanks to 7nm products
The message was fairly simple from Rolland: AMD is continuing to increase the rate of its sales with Ryzen desktop SKUs. Mr. Rolland found that year-to-date shipments of desktop-class Ryzen's outpaced AMD's 2018 numbers by more than 20%.
What's even more exciting for AMD investors is that a good chunk of this data was backed by older 2000-series Ryzen chips, based on older Global Foundries 14nm technology. The firm's newer 7nm-based 3000 series of processors, fabricated at TSMC, has garnered significant praise from enthusiasts and industry analysts alike.
The graph above shows a rolling year-long monthly sales data up to August 2019, in which we get to see two periods of sales that include AMD's newer 3000 range of Ryzen products. In fact, the Ryzen 3600 is totally almost the entirety of Intel's CPU lineup according to german retailer Mindfactory.
The Palo Alto, CA-based semiconductor firm isn't done there, either. We reported yesterday that new budget 6-core offerings are hitting store shelves soon which should help round out the bottom of the range for cost-conscious shoppers.
Of course, Mindfactory.de is only selling to enthusiasts who are building their own rigs, and AMD is still almost nowhere to be found in many OEMs such as Dell and HP. AMD understands this and can't make much further inroads into the pre-built space until its 7nm APUs roll out to partners sometime next year.
Its current Ryzen 2000 and 3000 require an add-in graphics card to allow for video output which makes it a poor match for common beige box pre-builts. We can say with at least a reasonable level of certainty that the qualities that make current Ryzen 3000 series popular with buyers (high core count and IPC versus cost and efficiency) should translate fairly well to the OEM market as well.
Tightened 7nm supply from TSMC is slowing AMD
However, all is not rosy for the company, according to Rolland. The analyst also states that an upcoming shortage of wafer capacity coming out of TSMC's 7nm production lines could hinder and cap AMD's growth outlook for the time being.
Case in point: try to find an AMD 3900X for retail MSRP! The 12-core range-toppers sell out as soon as they are listed, and if that is happening several months after launch it indicates strongly that demand is simply not getting satisfied; AMD is leaving revenue on the table since it can't get enough wafer starts ordered from its only capable vendor.
Second case in point: AMD has delayed the rollout of its 16-core flagship Ryzen SKU until November, almost assuredly because of the limited stock of its chiplets.
Further complicating this, we reported earlier this week that the fab might be facing even longer production lead times as a result of surging demand for its 7nm products. One must suspect that AMD is rapidly vetting Samsung's own EUV-backed 7nm fabs for future products..
The supply shortage is why Susquehanna isn't upping its guidance for AMD at this time and leaving its price target at $34 per share, or about 14% above current levels.
Shares of AMD closed today at $30.05 have been staying fairly close to its 52-week high of $35 over the last three months. AMD is up 66% for the year and is easily outpacing both Intel (NASDAQ:INTC) (9.5%) and NVIDIA (NASDAQ:NVDA) (30%), its two closest competitors, year-to-date.
Lastly, we are nearing earnings season again! AMD is due to report on its Q3 performance sometime around the third or fourth week of October. We reported on Q2 earnings here, and the headline of the day was that the company was guiding to a less-than-hoped-for Q3, which the chipmaker is now wrapping up in a few weeks. As always, we will have same-day coverage of AMD's financial results here at Wccftech!