Advanced Micro Devices Is On The Right Path

| About: Advanced Micro (AMD)


The introduction of mobile Kaveri APUs will allow the company to capture a substantial market share due to its unique features.

The efforts to decrease the cost of the 4K monitors will result in higher demand for high-specification graphics cards.

Focus on the high-growth areas of the industry will result in better fundamentals and strong trend in the stock price over the next two-three years.

Advanced Micro Devices (NASDAQ:AMD) started last year with the introduction of world's first desktop Accelerated Processing Units [APUs], codenamed Kaveri, capable of providing modest gaming graphics along with superfast processing speeds. The company introduced the Kaveri desktop APUs in the last year; however, the shipping began earlier this year. The technology faced strong rivalry from Intel Corporation's (NASDAQ:INTC) Core Processor Series which has entered its fifth generation using a smaller and energy-efficient 14-nanometer technology. However, AMD has introduced its newest product in a mobile version as well. The company announced its very first enthusiast-class mobile APUs promising budget gaming for notebooks for both personal and professional usage. The new performance mobile APUs are designed for ultrathin and high performance mobile PCs, which lack high graphics components due to their size specifications.

Will the new mobile APU create any difference?

The ultra-thin and high performance mobile PCs have to compromise on graphics to extend their battery life; however, AMD has changed that by introducing its new mobile APUs. The new mobile lineup is aimed at offering modest gaming experience and improved entertainment in slim, inexpensive packages to the consumers. Further, the latest APU will support 4K resolution, improved video streaming and surround sound audio technology to the budget machines.

The Kaveri chips will go into mobile PCs starting at around $400 competing Intel's Core processor series, codenamed Haswell. The company also claims to outpace the Haswell processors with 818 gigaflops of performance on the fastest chip. However, most buyers prefer Intel powered mobile PCs representing a larger market share, but AMD has implemented a new chip design with a new processor core in Kaveri, named Steamroller, along with Radeon graphics processors, similar to ones found in PlayStation 4 and XBOX One. This will enable the company to increase its market share for the mobile PCs.

The company has also introduced a professional line of the APUs, named AMD Pro A-Series, targeting the demand of evolving marketplace for performance and stability in the business systems. However, AMD has significantly decreased its dependence on the PC market over the last few quarters, but it continues to derive a considerable portion of its revenues from the segment. Further, the new Kaveri notebook processors are the first ones to offer full HSA [Heterogeneous System Architecture] support which will largely attract the huge programmers market to fully exploit the capabilities of parallel execution units. Such competitive features will surely enhance the revenues from PC market.

Beyond better gaming experience and high end technical specifications, the new mobile APUs will be able to provide Kinect-like gesture recognition capabilities in laptops, something that could not be easily achieved by earlier AMD chips. Moreover, the CPU and GPU shaders are able to process the moving hand gestures. Further, it could be done with a basic webcam and it would not require expensive 3D cameras as Intel is recommending for gesture and face recognition on mobile PCs.

Gaming Segment Progress

The graphic industry will benefit in the future as technology giants Intel and Samsung Electronics (OTC:SSNLF) are teaming up to reduce the prices of 4K monitors at 24 inches to as low as $400, currently priced at around $800. This will increase the trend of graphics card sales, benefiting GPU vendors as higher resolution displays push demand for higher graphics performance. Moreover, as higher resolution displays become more popular in the desktop PC gaming community, the demand for newer and 4K compatible graphics card will increase. Meanwhile, as the company launches new high-end lineups for the increased performance demand, the existing top-tier 4K compatible graphics cards sales such as R9 series will also increase. The 4K display revolution will substantially benefit the company in the coming years and provides a first-mover advantage to AMD due to its R9 4K capable graphics card series.

Moreover, AMD expects the life cycles of current gaming consoles to be shorter than their predecessors. PlayStation 3 and XBOX 360 had a long life span of around 7-8 years, which is mainly to recover the high costs incurred in their manufacturing processes. If the manufacturing costs of gaming consoles are driven down, then the technology giants such as Sony (NYSE:SNE), Microsoft (NASDAQ:MSFT) and Nintendo (OTCPK:NTDOY) can bring their next hardware in a shorter time. Sony officials have reported that they have started reporting profits on each PS4 sold. This news will be beneficial for AMD, who currently provides the processing and graphics power to PS4 and XBOX One, and is xpecting to continue the legacy.


AMD's efforts in the mobile segment will supplement its growth in the graphics segment. The company is making solid progress on its growth plan, which it plans to achieve over the next few quarters. Kaveri will be an important player for AMD over the next few years as the company continues its shift towards the high-growth areas of the industry. We believe AMD is on the right path and its turnaround will continue. Over the next two-three years, we are expecting to see a considerable rise in the stock price on the back of solid fundamental growth due to the focus on high-growth segments of the industry.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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