AMD: Epyc Milan Is Even More Epic Than You'd Think
Summary
- AMD was overpriced, but fundamentals are quickly catching up to its valuation and provide investors with an entry opportunity.
- AMD Epyc Milan annihilates Intel's current offering and becomes the go-to-guy for data centers.
- Network Function Virtualization is an aspect the market is not fully pricing into AMD's Epyc offering.
Summary
AMD (NASDAQ:AMD) is a hot topic on The Street. I'm long AMD and have been since the beginning of 2020 when AMD started to annihilate Intel (INTC) in the laptop and desktop space.
Source: swaggystocks.com
A few months ago, the stock price got the better of AMD. Fundamentals are quickly catching up, and we have reached a point where another opportunity for new AMD investors emerge to become a shareholder of this great company.
AMD Epyc Milan - Virtualization Masterpiece
Quick Network Function Virtualization Recap
If you know about NFV, jump to "End of Recap."
In 2016 Intel and AT&T (T) announced a partnership in which AT&T will use Intel's chips for its network virtualization efforts. Network virtualization replaces expensive and specialized hardware with software that runs on standard x86-based systems. The benefits of NFV Systems become more scalable, flexible, standardized, and providers can quickly react to changing customer demand.
The picture below depicts what network virtualization looks like.
Without NFV, even between VMs, data exchange would run through physical switches and routers. NFV replaces the hardware requirements from the VMs (in this example) and routes the data through the software 'logic' layer.
Source: Author
NFV is now the standard within the industry, with companies like Cisco (CSCO), Ribbon (RBBN), Huawei, and many more expanding their software product portfolios to address this need.
End of Recap
One aspect of the new Epyc Milan that the market is not considering is the huge potential in the virtualization environment. As hardware functionality is further virtualized, security becomes a concern, especially real-time data encryption.
Google Cloud already switched to AMD for application runtime encryption as AMD's Epyc processor is so powerful that it can handle real-time encryption with little to no performance loss. The 7002 already had these functionalities, but the 7003 adds a cherry to this cake with SEV-Secure nested paging.
Source: AMD Milan Announcement
Virtual machines play a crucial role in our internet ecosystem, and currently, only AMD offers the right security for attacks against data centers and their VM network. With AMD's SEV-secure nested paging, the VMs are protected even if the hypervisor host is compromised.
Source: Author
So even if a server is compromised, the virtual machines running the workloads are still safe — a big gamechanger for enterprises and data centers.
Epyc Milan was released two months ago for the general market
Another aspect about the Milan is that AMD started shipping these chips to hyperscale data centers and cloud providers throughout 2020, but sales to the rest of the market began only in March 2021. We haven't seen the full impact of these chips on the broad market yet.
Epyc Milan is even more Epic than you'd think
AMD's ZEN 3 architecture just propelled them to the go-to guy for enterprises and data center workloads. If you are running simulations or models, you have to choose AMD just from a cost perspective. AMD can perform 3 loads and 2 stores per cycle. That's more than double the workload per cycle.
Source: AMD Milan Announcement
What's more, they reduced TCO for the same performance by 35% with their EPYC 7763 against Intel's Xeon 6258R. So data centers that are in the renewing cycle will have a hard time justifying not switching to AMD.
Source: AMD Milan Announcement
Data centers have huge power requirements; anything that can reduce these requirements is desired. AMD's Epyc Milan uses 35% less power with more processing power!
Conclusion
AMD is at the forefront of desktop and laptop performance. Most laptop OEMs already included AMD's processors, and considering the price/performance ratio, the rest will follow.
I see the fundamentals easily catching up to current valuations. The market is not fully pricing in the full potential of the Epyc Milan processor in the network virtualization market. We have yet to see how the broader market reacts to the Epyc Milan chip, but in my opinion, AMD has much more room for growth considering the market share that AMD will take from Intel.
I always welcome constructive criticism and open discussions. Please feel free to comment about my calculations and/or sources that I use in my articles.
This article was written by
Analyst’s Disclosure: I am/we are long INTC, AMD, CSCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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