For my 11th Sunday deep dive, we're tackling the fascinating world of AMD. From revolutionary processors to industry-leading graphics cards, $AMD has been pushing the boundaries of technology for decades. So let's explore what makes them such a powerhouse in the tech world.
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1/ Intro:
Advanced Micro Devices, Inc. $AMD is an American multinational semiconductor company that designs and produces microprocessors, graphics processors, and other computer components. The company was founded in 1969 and is headquartered in Santa Clara, California.
Advanced Micro Devices, Inc. $AMD is an American multinational semiconductor company that designs and produces microprocessors, graphics processors, and other computer components. The company was founded in 1969 and is headquartered in Santa Clara, California.
2/ $AMD is one of the largest suppliers of computer processors & graphics cards, with its products used in PCs, game consoles & data centers. AMD is a fabless company, meaning it designs its chips & processors, but it outsources the manufacturing of them to 3rd parties like TSMC.
3/ Company History:
$AMD was founded in 1969 by Jerry Sanders and seven other industry veterans.
If you'd like to read up on their history in a bit more detail, I created a thread earlier this week to do just that.
$AMD was founded in 1969 by Jerry Sanders and seven other industry veterans.
If you'd like to read up on their history in a bit more detail, I created a thread earlier this week to do just that.
4/ Mission:
$AMD's mission is to "build great products that accelerate next-generation computing experiences."
$AMD's mission is to "build great products that accelerate next-generation computing experiences."
5/ Glassdoor:
$AMD has stellar ratings on Glassdoor with 4.2 Stars. A whopping 97% of employees approve of the work being done by CEO, Lisa Su and almost 9 out of every 10 employees would recommend working at AMD to a friend.
$AMD has stellar ratings on Glassdoor with 4.2 Stars. A whopping 97% of employees approve of the work being done by CEO, Lisa Su and almost 9 out of every 10 employees would recommend working at AMD to a friend.
6/ Product Portfolio:ย
$AMD specializes in CPUs, GPUs & computer components/processors but as of 2022, AMD's most
popular products include:
โถ๏ธ EPYC processors - These server processors are designed for data centers, cloud computing & offer high performance & energy efficiency.
$AMD specializes in CPUs, GPUs & computer components/processors but as of 2022, AMD's most
popular products include:
โถ๏ธ EPYC processors - These server processors are designed for data centers, cloud computing & offer high performance & energy efficiency.
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โถ๏ธ Ryzen processors - These high-performance processors are designed for desktop and laptop PCs, and are popular among gamers, content creators, and professionals who need powerful computing capabilities.
โถ๏ธ Ryzen processors - These high-performance processors are designed for desktop and laptop PCs, and are popular among gamers, content creators, and professionals who need powerful computing capabilities.
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โถ๏ธ Radeon graphics cards - are designed for gaming & content creation, are popular among gamers & professionals who need powerful graphics capabilities.
โถ๏ธ Instinct accelerators - are designed for AI & machine learning (ML) apps & are used in data centers and HPC systems.
โถ๏ธ Radeon graphics cards - are designed for gaming & content creation, are popular among gamers & professionals who need powerful graphics capabilities.
โถ๏ธ Instinct accelerators - are designed for AI & machine learning (ML) apps & are used in data centers and HPC systems.
9/ Industries where $AMD's chips are most used in:ย
โช๏ธ HPC systems
โช๏ธ PCs & laptops
โช๏ธ Graphics cards
โช๏ธ Gaming consoles
โช๏ธ Servers & data centers
โช๏ธ AI & Automotive applications
โช๏ธ Embedded systems (digital signage, medical imaging, aerospace & defense)
โช๏ธ HPC systems
โช๏ธ PCs & laptops
โช๏ธ Graphics cards
โช๏ธ Gaming consoles
โช๏ธ Servers & data centers
โช๏ธ AI & Automotive applications
โช๏ธ Embedded systems (digital signage, medical imaging, aerospace & defense)
10/ Xilinx Acquisition:ย
$AMD paid approximately $35 billion in stock for the acquisition of Xilinx. This deal was announced in Oct 2020 and was completed in Feb 2022. The acquisition was the largest in AMD's history and was part AMD's efforts to diversify its product portfolio.
$AMD paid approximately $35 billion in stock for the acquisition of Xilinx. This deal was announced in Oct 2020 and was completed in Feb 2022. The acquisition was the largest in AMD's history and was part AMD's efforts to diversify its product portfolio.
11/ The acquisition of Xilinx helped $AMD in several ways:
๐ธExpansion into new markets: Xilinx is a leader in the field of FPGA (Field Programmable Gate Array) technology, which is used in a wide range of industries like automotive, aerospace, defense, and telecommunications.
๐ธExpansion into new markets: Xilinx is a leader in the field of FPGA (Field Programmable Gate Array) technology, which is used in a wide range of industries like automotive, aerospace, defense, and telecommunications.
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๐ธComplementary product portfolios: Xilinx's FPGA products complement AMD's existing products, such as its CPUs and GPUs, and together, they can provide more comprehensive solutions to customers.
๐ธComplementary product portfolios: Xilinx's FPGA products complement AMD's existing products, such as its CPUs and GPUs, and together, they can provide more comprehensive solutions to customers.
13/
๐ธSynergies: By combining resources & redcing redundancies, the acquisition creates cost savings & operational synergies.
๐ธIncreased competition: Xilinx helped $AMD better compete with Intel, which has been expanding its own presence in the FPGA market by acquiring Altera.
๐ธSynergies: By combining resources & redcing redundancies, the acquisition creates cost savings & operational synergies.
๐ธIncreased competition: Xilinx helped $AMD better compete with Intel, which has been expanding its own presence in the FPGA market by acquiring Altera.
14/ Significance of Lisa Su:
Since taking the helm at $AMD in Oct 2014, Su has overseen a remarkable turnaround for AMD, driving strong growth & innovation across its product portfolio.
Lisa Su is widely regarded as one of the best CEOs in the technology industry today due to:
Since taking the helm at $AMD in Oct 2014, Su has overseen a remarkable turnaround for AMD, driving strong growth & innovation across its product portfolio.
Lisa Su is widely regarded as one of the best CEOs in the technology industry today due to:
15/ Visionary leadership:
Lisa Su has a clear & ambitious vision for $AMD, focused on driving innovation & growth. She has set aggressive goals for the company, including capturing market share in key segments such as gaming and data centers.
Lisa Su has a clear & ambitious vision for $AMD, focused on driving innovation & growth. She has set aggressive goals for the company, including capturing market share in key segments such as gaming and data centers.
16/ Strategic focus:
Su has implemented a focused strategy for AMD, centered around product development. Under her leadership, $AMD has invested heavily in new products & technologies & has successfully positioned itself as a major competitor to Intel $INTC and Nvidia $NVDA.
Su has implemented a focused strategy for AMD, centered around product development. Under her leadership, $AMD has invested heavily in new products & technologies & has successfully positioned itself as a major competitor to Intel $INTC and Nvidia $NVDA.
17/ Strong execution:
Su has demonstrated strong execution skills, driving successful product launches & delivering strong financial results. She has also overseen key partnerships and acquisitions, such as the acquisition of Xilinx.
Su has demonstrated strong execution skills, driving successful product launches & delivering strong financial results. She has also overseen key partnerships and acquisitions, such as the acquisition of Xilinx.
18/ Strong industry reputation:
Su is widely respected within the technology industry & is known for her technical expertise & strategic vision. She has been recognized with numerous awards and honors, including being named to Fortune's list of the World's 50 Greatest Leaders.
Su is widely respected within the technology industry & is known for her technical expertise & strategic vision. She has been recognized with numerous awards and honors, including being named to Fortune's list of the World's 50 Greatest Leaders.
19/ How does $AMD make money?
AMD generates revenue through four main ways:
โถ๏ธ Client revenue: This includes sales of processors and graphics cards for personal computers and laptops. AMD's Ryzen and Radeon product lines are examples of client products.
AMD generates revenue through four main ways:
โถ๏ธ Client revenue: This includes sales of processors and graphics cards for personal computers and laptops. AMD's Ryzen and Radeon product lines are examples of client products.
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โถ๏ธ Data center revenue: This includes sales of processors for servers and data centers. AMD's EPYC processors are designed for data center use and compete with similar products from Intel.
โถ๏ธ Data center revenue: This includes sales of processors for servers and data centers. AMD's EPYC processors are designed for data center use and compete with similar products from Intel.
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โถ๏ธ Gaming revenue: includes sales of processors and graphics cards for gaming consoles and personal computers. AMD's Radeon graphics cards are popular among gamers.
โถ๏ธ Gaming revenue: includes sales of processors and graphics cards for gaming consoles and personal computers. AMD's Radeon graphics cards are popular among gamers.
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โถ๏ธ Embedded revenue: This includes sales of processors and system-on-chip solutions for embedded applications such as medical devices, industrial automation, and gaming machines.
โถ๏ธ Embedded revenue: This includes sales of processors and system-on-chip solutions for embedded applications such as medical devices, industrial automation, and gaming machines.
23/ The Positives: AMD has a moat based on:
1โฃ Economies of scale: $AMD's size & market share allow it to benefit from economies of scale in manufacturing & distribution, which can result in lower costs & higher profits. This also allows AMD to invest in R&D for future products.
1โฃ Economies of scale: $AMD's size & market share allow it to benefit from economies of scale in manufacturing & distribution, which can result in lower costs & higher profits. This also allows AMD to invest in R&D for future products.
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2โฃ Brand recognition: $AMD has a strong brand recognition in the industry, particularly among consumers who prioritize high-performance computing. This recognition has been boosted by successful product launches, marketing & partnerships with brands like Dell & HP.
2โฃ Brand recognition: $AMD has a strong brand recognition in the industry, particularly among consumers who prioritize high-performance computing. This recognition has been boosted by successful product launches, marketing & partnerships with brands like Dell & HP.
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3โฃ High barriers to entry: The semiconductor industry needs significant capital investment, technical expertise & access to specialized manufacturing facilities. This creates high barriers to entry, making it difficult for new players to enter the market & compete with $AMD.
3โฃ High barriers to entry: The semiconductor industry needs significant capital investment, technical expertise & access to specialized manufacturing facilities. This creates high barriers to entry, making it difficult for new players to enter the market & compete with $AMD.
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4โฃ Proprietary technology: $AMD invests heavily in developing tech that sets its products apart, including innovations in microarchitecture, graphics processing & chip manufacturing. These techs are often protected by patents, providing AMD with a competitive advantage.
4โฃ Proprietary technology: $AMD invests heavily in developing tech that sets its products apart, including innovations in microarchitecture, graphics processing & chip manufacturing. These techs are often protected by patents, providing AMD with a competitive advantage.
27/ The Challenges:
1โฃ Intense competition: The semiconductor industry is highly competitive, with several large players like Intel $INTC and Nvidia $NVDA, competing for market share. AMD must continue to innovate and develop new technologies to stay ahead of its competitors.
1โฃ Intense competition: The semiconductor industry is highly competitive, with several large players like Intel $INTC and Nvidia $NVDA, competing for market share. AMD must continue to innovate and develop new technologies to stay ahead of its competitors.
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2โฃ Dependence on PC & gaming markets: While $AMD has recently made significant gains in the data center market, its revenue is still heavily dependent on the PC and gaming markets. As these markets evolve, AMD may need to adapt its product offerings to remain competitive.
2โฃ Dependence on PC & gaming markets: While $AMD has recently made significant gains in the data center market, its revenue is still heavily dependent on the PC and gaming markets. As these markets evolve, AMD may need to adapt its product offerings to remain competitive.
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3โฃ Manufacturing/SC constraints: $AMD relies on third-party manufacturers such as $TSM to produce its chips, which can be a bottleneck in terms of production capacity and supply chain management.
3โฃ Manufacturing/SC constraints: $AMD relies on third-party manufacturers such as $TSM to produce its chips, which can be a bottleneck in terms of production capacity and supply chain management.
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4โฃ Intellectual property disputes: As a company with a significant portfolio of patents and intellectual property, $AMD may face legal challenges from competitors or other entities seeking to challenge its technology or seek licensing agreements.
4โฃ Intellectual property disputes: As a company with a significant portfolio of patents and intellectual property, $AMD may face legal challenges from competitors or other entities seeking to challenge its technology or seek licensing agreements.
31/ Financials - Income Statement:
Quarter: Revenues for Q4 2023 were $5.6B, ๐ผ16.67% YoY from $4.8B
Annual: Revenues for FY 2023 were $23.6B, ๐ผ43.9% YoY from $16.4B.
๐ธGrowth in revenue helped mainly by the Xilinx acquisition.
Quarter: Revenues for Q4 2023 were $5.6B, ๐ผ16.67% YoY from $4.8B
Annual: Revenues for FY 2023 were $23.6B, ๐ผ43.9% YoY from $16.4B.
๐ธGrowth in revenue helped mainly by the Xilinx acquisition.
32/ Financials - Gross Margin:
GAAP basis: GM is 43%, ๐ป7% YoY from 51%
Non-GAAP basis: GM is 51%, ๐ผ1% YoY from 50%
GAAP basis: GM is 43%, ๐ป7% YoY from 51%
Non-GAAP basis: GM is 51%, ๐ผ1% YoY from 50%
33/ Financials - Balance Sheet:
$AMD's balance sheet is in good shape with Cash totaling $4.8B (๐ผYoY) at the end of their most recent quarter and total debt around $2.9B.
2021 Cash: $1.6B | Debt: $0.5B
2022 Cash: $2.5B | Debt: $0.7B
2023 Cash: $4.8B | Debt: $2.9B
$AMD's balance sheet is in good shape with Cash totaling $4.8B (๐ผYoY) at the end of their most recent quarter and total debt around $2.9B.
2021 Cash: $1.6B | Debt: $0.5B
2022 Cash: $2.5B | Debt: $0.7B
2023 Cash: $4.8B | Debt: $2.9B
34/ Financials - FCF:
At the end of Q4 2023, FCF was $0.6B, ๐ป from $0.7B YoY but for FY 2023, $AMD was FCF positive to the tune of $3.6B, ๐ผ from $3.2B YoY.
2020 FCF: $0.8B
2021 FCF: $3.2B
2022 FCF: $3.6B
At the end of Q4 2023, FCF was $0.6B, ๐ป from $0.7B YoY but for FY 2023, $AMD was FCF positive to the tune of $3.6B, ๐ผ from $3.2B YoY.
2020 FCF: $0.8B
2021 FCF: $3.2B
2022 FCF: $3.6B
35/ Growth Opportunities:
AMD's future growth prospects look promising with the rise in AI, Chatbots and as the company continues to innovate and expand into new markets, while benefiting from the growing demand for high-performance computing solutions.
AMD's future growth prospects look promising with the rise in AI, Chatbots and as the company continues to innovate and expand into new markets, while benefiting from the growing demand for high-performance computing solutions.
36/ Expansion into new markets: $AMD has been expanding into new markets, including the data center and embedded markets. The Xilinx acquisition, gives AMD access to the fast-growing market for specialized computing and high-performance computing applications.
37/ Rise of AI: AI is increasingly being used in gaming, data centers & embedded systems, which are all areas where $AMD generates revenue. As AI becomes more prevalent, the demand for high-performance computing solutions increase, which can benefit AMD's product offerings.
38/ Rise of Chatbots: $AMD has the potential to tap into the growing demand for generative AI by launching new chips that cater to the processing requirements of the creator community. This presents a new and lucrative market opportunity for AMD.
39/ Valuation:
Valuation below courtesy of the @Quartr_App:
โถ๏ธ FY 23E: Trading at 6.5x sales, 31x FCF & 32x earnings
โถ๏ธ FY 24E: Trading at 5.5x sales, 23x FCF & 22.5x earnings
โถ๏ธ FY 25E: Trading at 5x sales, 19x FCF & 19x earnings
Valuation below courtesy of the @Quartr_App:
โถ๏ธ FY 23E: Trading at 6.5x sales, 31x FCF & 32x earnings
โถ๏ธ FY 24E: Trading at 5.5x sales, 23x FCF & 22.5x earnings
โถ๏ธ FY 25E: Trading at 5x sales, 19x FCF & 19x earnings
40/ Analyst Estimates:
As of today, 3.19.23, the price of the $AMD stock is $97.84 and the market cap is ~$158B. Below are the estimates from Wall St. analysts:
As of today, 3.19.23, the price of the $AMD stock is $97.84 and the market cap is ~$158B. Below are the estimates from Wall St. analysts:
41/ Based on the chart above:
๐ฅWorst Case: is a $67 PT which presents a 31.52% downside from today's price.
๐ฅNormal Case: is a $93.88 PT which presents a 4.05% downside from today's price.
๐ฅBest Case: is a $200 PT which presents a 104.42% upside from today's price.
๐ฅWorst Case: is a $67 PT which presents a 31.52% downside from today's price.
๐ฅNormal Case: is a $93.88 PT which presents a 4.05% downside from today's price.
๐ฅBest Case: is a $200 PT which presents a 104.42% upside from today's price.
42/ And with that, we wrap up our deep dive on $AMD. Whether you're an investor, a tech enthusiast, or just someone who loves a good underdog story, it's hard not to be impressed by the company's journey so far.
43/ From humble beginnings to industry leader, $AMD has proven time and time again that it's a force to be reckoned with. And with exciting developments like the Xilinx acquisition and the rise of new technologies, the future looks bright for this scrappy little chipmaker!
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