Advanced Micro Devices, Inc. AMD recently entered into strategic partnership with Samsung Electronics Co., Ltd. with an aim to bring immersive graphics experience to smartphone users.
Per the terms of the multi-year agreement, AMD’s high performance Radeon graphics solutions and technologies will be integrated with by Samsung’s SoCs to enhance mobile applications.
Consequently, AMD will receive license payments and royalty fees for its RDNA graphics architecture-based custom graphics IP solutions. However, the financial terms of the deal have been kept under wraps.
Partnership with a bellwether like Samsung with focus on mobile computing is expected to expand AMD’s Radeon graphics’ market reach significantly.
We believe this is a noteworthy win for AMD and strengthens its competitive position against graphics peers, including NVIDIA NVDA and ARM Holdings.
Growing Adoption Fuels Optimism
Streaming of graphics-intensive games requires high-performance processing functionalities which reduce latency and accelerate game performance in a securely managed infrastructure. These requirements favor the adoption AMD’s Radeon GPUs.
AMD has been securing notable customer wins on the back of its strength in GPU portfolio offering higher-performance with low-power consumption.
Markedly, AMD is powering forthcoming gaming consoles from Sony. Further, Alphabet GOOGL division Google’s upcoming cloud-based video game streaming service, Stadia utilizes AMD’s customized Radeon datacenter GPUs.
The company is leaving no stone unturned to capitalize on the growing clout of console/cloud gaming across devices, be it PCs, laptops or mobile phones. These developments instill confidence in the stock.
Notably, shares of AMD have returned 43.3% year to date, substantially outperforming the industry’s rally of 7%.
Strategic Product Roll Outs to Favor Growth Prospects
AMD’s expanding GPU portfolio catering to every price point is enabling the company to carve out a noteworthy position in datacenter GPU market.
Moreover, diversification of its graphics portfolio and enhancement with software tools is anticipated to cushion AMD from sluggish GPU demand owing to cryptocurrency miners.
For instance, at COMPUTEX 2019, AMD introduced RDNA, which supports PC-quality streaming to VR headsets, and Android and iOS-based mobile phones, provided desired speed for optimal graphics solutions.
Moreover, the company unveiled its new Radeon Software Adrenalin 2019 Edition. This updated version will feature the WattMan technology and be based on the AMD Radeon GPUs.
Further, AMD’s 7-nanometer (nm) Radeon Vega GPU, AMD Radeon VII, priced at $699, is expected to aid AMD in penetrating the high-end graphics card market.
The latest Samsung win and incremental adoption of ongoing GPU roll outs is expected to benefit AMD’s growth prospects and improve its competitive position in graphics market.
Zacks Rank & Key Pick
AMD currently has a Zacks Rank #3 (Hold).
A better-ranked stock in the same industry is Silicon Motion Technology Corporation SIMO, sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Silicon Motion is pegged at 5%.
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