A bull case for AMD, an asset to own over the next 3-5 years.
The semiconductor industry has been one of the winners during the COVID-19 pandemic era. They are the backbone of the technology industry and with the rapid adoption of remote work and automation by the work force, the demand for microchips has skyrocketed. In fact, some say there’s even a shortage of microchips. Most companies are processing more data than ever before, our hospitals and COVID-19 vaccine researchers certainly are. Gaming has slowly been gaining momentum with the adoption of esports, but now with virtual concerts also being a feature, microchips in gaming consoles are only getting better. Even the electric vehicles (EVs) manufacturers want microchips for their cars and are complaining that they are being ignored by the semiconductor industry. With Internet of Things (IoT) devices rapid adoption, we should expect microchips in everything in the near future.
(BBC & Wired)
So, we know the semiconductor industry is hot, it is rapidly innovating and moving to partner with new sectors and industries. However, not all players are properly positioned to take advantage of this surge in demand. Historically, it’s been Intel vs. AMD, but of late Intel has been stumbling and although these stumbles have more to do with Intel as a company itself as opposed to AMD exerting dominance, the narrative of their rivalry usually plays into investors minds. All of this to say, when Intel goes down, AMD usually goes up. Players like Nvidia, TSMC in the industry seem to be surging from the increase in microchip demand like AMD, but with the industry expanding this doesn’t seem to affect AMD’s future growth yet.
(MarketWatch & WSJ)
Moreover, realizing that the time to strike is now. Demand is surging and our largest competitor isn’t doing too well, it is time to consolidate. AMD just completed an all-stock $35 billion merger with Xilinx, another semiconductor player to help expand its footprint in the datacenter segment. This has in turn caused their C-suite to expand bringing equally qualified colleagues to help shore up the ranks. AMD is positioning itself for near term as well as long term growth. (AMD)
(MarketWatch & Investopedia)
With a median price target of $93 from analysts. It can be assumed that AMD is a fully valued stock without much of a discount. A potential reason for this may also be the all-stock nature of its most recent merger. (Reuters)
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