As gaming companies go all out to capture the potential offered by cloud gaming, Advanced Micro Devices, Inc. (NASDAQ: AMD) seems to have emerged an early winner, according to Morgan Stanley.
Analyst Joseph Moore maintained an Underperform on AMD with a $17 price target.
Cloud gaming is likely to evolve as a significant initiative over time, as console and PC gaming migrate toward higher use of cloud to supplement local hardware and expand the total addressable market, Moore said in a Tuesday note.
Notwithstanding AMD's less-competitive portfolio, it has had success, especially in mid-range graphics, the analyst said.
To achieve nominal competitiveness on benchmarks with respect to Vega and Vega 2 architectures, AMD had to use high-bandwidth memory, which comes with prohibitive costs, Moore said.
Despite the handicap, AMD has been working with Alphabet Inc (NASDAQ: GOOGL) (GOOG)'s "Project Stream," which, according to Morgan Stanley, will be the basis for the latter's cloud gaming initiative to be announced at the Game Developer's Conference next week.
"AMD has essentially built the functionality into the hardware to maintain a consistent commitment of a portion of the hardware to each user, vs. NVIDIA Corporation (NASDAQ: NVDA), which uses a software layer to determine those connections," the analyst said.
AMD's methodology offers better security and lower latency, making it a big hit with cloud providers despite GPU performance that lags NVIDIA, Moore said.
"We continue to be impressed by AMD's progress at using innovative approaches to expand its markets in all segments, though we also still see the stock as ahead of itself."
The Price Action
AMD shares were advancing 6.19 percent to $24.69 at the time of publication Tuesday.
Analysts Weigh In On AMD Earnings Relief Rally
Stifel Raises AMD Price Target By 80%
Latest Ratings for AMD
|Oct 2018||BMO Capital||Maintains||Market Perform||Market Perform|
View More Analyst Ratings for AMD
View the Latest Analyst Ratings
See more from Benzinga
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.