AMD's secret weapon for beating Intel revealed

Advanced Micro Devices - AMD is set to continue eating into Intel's business, according to a bullish report.

A bank's analyst upgraded AMD's stock to "overweight" from "equal weight" and predicts that the company's Genoa and Bergamo platforms will be the driving force behind further market-share gains at Intel's expense.

The Upgrade

The upgrade is due to AMD's lead over rival Intel in the server market following the launch of its new data center product Genoa late last year. CEO Lisa Su has said that Genoa will translate into "lower capex, lower opex and lower total cost of ownership" for enterprises and for cloud data centers.

AMD could see potential gains from Meta Platforms when it accelerates spending later this year. This, coupled with the chip sector rally, has caused AMD stock to jump 7.85% in early afternoon trading on Monday, following a 3.5% advance on Friday.

However, the company did note solid gains for its gaming and data center businesses that partly offset further weakness expected in demand for personal computing chips.

Looking into the final months of the year, AMD said it sees quarterly revenue in the region of $5.5 billion, plus or minus $300 million, with gross margins rising to around 51% on sequential growth for its embedded and data center units. This is lower than Refinitv's estimate of around $5.85 billion.

AMD vs INTEL

In comparison, Intel will be publishing its fourth quarter earnings on Thursday, with analysts looking for an adjusted bottom line of 20 cents per share on revenues of $14.47 billion. Last autumn, Intel lowered its forecast for overall revenues to $63.5 billion, down from its prior forecast of between $65 billion and $68 billion.

The company also lowered its forecast for PC demand for both this year and next, while detailing cost reduction plans that it said would save $3 billion in 2023 and a further $8 billion to $10 billion by 2025.

While AMD's recent developments and upgrade from Barclays may be encouraging, it's important to also consider the company's weaker-than-expected earnings and the competition from Intel.

It may be wise to wait and see how the company performs in the coming months before making any decisions on whether to dump AMD stock.