Advanced Micro Devices Advance Even as Data Center Concerns Emerge

Andrei Berezovsky

Advanced micro-systems (NASDAQ: AMD) finished slightly higher Major chip stocks hit the third straight day of gains on Wednesday, even as Wells Fargo slashed estimates for the Dr. Lisa Su-led company due to the PC market weakness and emerging concerns in the data center industry.

Wells Fargo analyst Aaron Rakers noted that AMD (AMD) shares “will likely remain under pressure” until investors believe the risks to the stock have subsided. For its part, Rakers has an overweight rating and a price target of $130 per share on AMD (AMD) stock.

Rakers explained that the PC market is expected to decline in mid-to-high teens this year and in mid-digits next year. And with growing concern over the data center, there are “downside risks in AMD’s data center segment.”

As such, Rakers lowered its 2022 revenue and earnings estimate to $25.5 billion and $4.11 per share from $26.2 billion and $4.32 per share. It also cut its estimates for 2023 and 2024 to $26.6 billion and $29.4 billion in annual revenue, with earnings per share of $4.13 and $4.75, respectively.

Regarding the data center, Rakers said AMD (AMD) continues to gain market share, but there is concern over inventory, especially among hyperscalers.

“AMD’s Commentary on Data Center Growth [and] resilience is a key objective amid concerns over slowing hyperscale [capital expense] dynamic” and elongated transaction cycles, Rakers said.

Nvidia (NVDA) and Intel (INTC), both of which compete with AMD, have both seen fractional moves.

STMicroelectronics (NYSE: STM) shares gained more than 2% as the company announced it would build a 730 million euro integrated silicon carbide substrate manufacturing plant in Italy to meet increased demand.

Production is expected to start in 2023.

Taiwan semiconductor (New York Stock Exchange: TSM) shares rose more than 2% as Morgan Stanley recommended the semiconductor foundry, calling it a “top pick.”

A group of analysts from Morgan Stanley noted that there should be a recovery in semiconductors in the second half of 2023 and that Taiwan Semiconductor (TSM) should benefit from it, as it is “the catalyst for future technology”.

Analysts also noted that Asian semiconductor companies are likely to recover faster than their US counterparts as some trade at minimal valuations while trends such as 5G, artificial intelligence and electric vehicles continue. their strong growth.

Separately on Wednesday, Bernstein analysts noted that Apple’s (AAPL) iPhone “could be a risk” for Taiwan Semiconductor (TSM) in the first quarter of 2023, fearing it could be “sub-seasonal” with the iPhone making the period even lower if it experiences a slow sale.

“We still expect Taiwan Semiconductor to increase prices and profit growth in [calendar year 2023 and 2024]“, wrote the analysts.

Other semiconductor stocks mostly closed higher as Texas Instruments (TXN) and Analog Devices (ADI), Micron (MU), Broadcom (AVGO) and Qualcomm (QCOM) ended the day on the upside .

Bank of America recently reiterated its buy ratings on Advanced Micro Devices (AMD) and several other cloud computing-related semiconductor companies, noting that the group is still likely to benefit from increased spending.

Ramon J. Espinoza