Advanced Micro Devices (AMD) has gone from strength to strength in recent years. While the company has become a giant in the semiconductor industry, it has also been incrementally eating away at its traditionally much bigger rival Intel’s dominance.

The wide gap has begun to close between the two companies and Northland analyst Gus Richard thinks it is about to get narrower still.

“We expect by CY22 AMD will be 30% the size of INTC, up from 9.2% in CY18,” the 5-star analyst said. “We expect the delta between INTC and AMD GM will decrease by 13.1% during this period. Also, we estimate that AMD's GM to exceed INTC's in CY23. AMD’s market share gains are likely to continue in 2H:21 and CY22 driven by corporate client and server.”

Richard expects AMD will have a “strong” Q2, but the analyst also points out that as the economy reopens, it is very likely the outsized demand for PCs seen during the pandemic era will fade.

So, bad news for AMD, right? Not necessarily. Simply put, Richard thinks AMD’s recent products are better than Intel’s, and due to its competitor’s missteps, AMD has been making inroads with a hard-to-crack client base – corporate customers.

Intel’s 14nm and 10nm shortages gave AMD a way into the corporate market, which the company can now build on.

“We estimate that AMD currently has a 5% to 7% share of the higher-margin corporate client market and expect its share to accelerate as corporations dual source,” the analyst noted.

There is also increasing evidence, says Richard, that Intel is more focused on “low-end” Chromebooks, which bodes well for “a strong 2H for AMD in the client market.”

While Richard thinks AMD’s revenue share in PC clients amounts to approximately 20% right now, over the next couple of years, he expects it to get closer to 50%.

Further bolstering the case for AMD is the anticipated closing of the Xilinx deal, which Richard believes will “significantly broaden AMD's IP portfolio and broaden its exposure to comms, industrial and automotive markets.”

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So, all good news for AMD but what are the implications for investors? Richard reiterated an Outperform (i.e., Buy) rating on the shares and keeps the $116 price target intact. Investors could be sitting on gains of 49%, should the analyst’s thesis play out in the year ahead. (To watch Richard’s track record, click here)

Not all of Wall Street’s analyst corps are currently behind AMD but enough to merit a Moderate Buy consensus rating. This is based on 10 Buys, 7 Holds and 1 Sell issued over the past 3 months. The average price target clocks in at $105.40, implying shares will be changing hands for ~35% premium in one year’s time. (See AMD stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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