AMD’s stock surges to record high while chip maker takes more market share from Intel

AMD released second-quarter results Tuesday afternoon that easily exceeded expectations, and the chip maker once again hiked its guidance for the year as data-center sales nearly tripled. Chief Executive Lisa Su said AMD was making progress securing “extra” resources to navigate the global chip shortage.

The report contrasted with struggles from larger rival Intel INTC, -0.21%, which laid out its product road map Monday and forecast it would retake its position as a leader in the chip space by 2025 while rebranding its chips, foregoing the use of transistor size to mark performance. Analysts were not all that impressed with Intel’s plan, similar to their response when Intel reported its results last week.

Analysts were impressed by AMD, though, with at least seven raising their price targets Wednesday morning in response to the results. Susquehanna Financial analyst Christopher Rolland raised his price target to $130 from $125 and brought up a theme that’s been getting a lot of traction lately: AMD is navigating the chip shortage particularly well with “extra” resources because it is Taiwan Semiconductor Manufacturing Co.’s TSM, +1.35% second largest customer — Apple Inc. AAPL, -1.22% is the largest. The theory assumes TSMC has an incentive in choosing sides as Intel seeks to compete with the manufacturer by expanding its own third-party foundry business.

“While the AMD procurement team should be applauded, we also can’t help but imagine that TSM is supporting their preferred CPU customer with additional wafers,” said Rolland, who has a positive rating on the shares.

Read: The chip crunch marches on, but one sector could be in store for relief

Cowen analyst Matthew Ramsay, who has an outperform rating and a $120 price target, also touched upon that theme.

“To us, the fact that the company continues to feel comfortable providing such impressive growth guidance indicates the strength of its partnership with TSMC and confidence in demand from key cloud and OEM customers, which has been earned through innovation and road map development years in the making,” Ramsay said.

Ramsay also touched upon the fact that AMD, which usually is reticent in divulging its data-center figures, said that more than 20% of its revenue came from booming data-center sales, and expects that to grow. The Cowen analyst said he now estimates that AMD will get about 25% of its business from server sales in the second half of the year.

Jefferies analyst Mark Lipacis, who has a buy on the stock, also believes share gains from Intel will accelerate, and sees data-center sales growing significantly as a part of AMD’s business.

“We estimate AMD share gains will continue to accelerate,” Lipacis said, and estimates data-center sales will account for about 28% of AMD’s sales by the fourth quarter, up from the “high teens” admitted by the company in the first quarter.

Bernstein analyst Stacy Rasgon, who has a market perform rating and a $110 price target, said it “was a very clean quarter for AMD, and there was admittedly very little to nitpick in these results.”

Rasgon said that AMD’s forecast of 60% full-year revenue growth, up from its previous forecast of 50% growth, “is hard to sneeze at.”

The Bernstein analyst also said that “gross margins are finally beginning to inflect, and Intel’s hopes of ‘stable’ share in the back half are clearly a pipe dream, with (given Intel’s admissions earlier in the week) AMD’s competitive window probably still open for years.”

See also: Intel appears to be feeling the competitive heat from AMD

Citi Research analyst Christopher Danley, who maintained his neutral rating valuation because of AMD’s stock price but hiked his target to $100 from $95, believes “AMD can continue its growth trajectory due to continued production delays at Intel, which we believe might happen for 7nm products as well.”

“We believe AMD share gains in the server market will accelerate for the next two years due to AMD’s one-generation-ahead server CPU products,” Danley said.

Of the 38 analysts who cover AMD, 23 have buy ratings, 13 have hold ratings, and two have sell ratings. The average analyst price target increased to $109.46 from a previous $104.22 with Tuesday’s increases, according to FactSet data.

Over the past 12 months, AMD shares have gained 42%. In comparison, the PHLX Semiconductor Index SOX, +1.76% has gained 58%, the S&P 500 index SPX, -0.02% has risen 37%, and the tech-heavy Nasdaq Composite Index COMP, +0.70% is up 42%.