AMD (NASDAQ:AMD) made some big announcements yesterday, and the market reacted: AMD stock posted a 6.1% gain on the day. Two things had investors excited about the company: 7nm chips and the news that Amazon (NASDAQ:AMZN) will be using AMD’s Epyc server chips in its Amazon Web Services (AWS) cloud computing division.
That AWS announcement represents a big win for AMD, and when it hit, AMD stock shot up by nearly 9% before settling down. But it’s the 7nm chips that may prove the bigger blow to rival — and industry leader — Intel (NASDAQ:INTC).
AMD Announces AWS Will Adopt Epyc Server Chips
On November 6, AMD announced a new partnership with Amazon Web Services. Starting immediately, AWS will be offering three of its most popular products on servers using AMD’s Epyc server chips. That’s obviously good news for Advanced Micro Devices (and AMD stock), but what’s in it for Amazon compared to using Intel hardware?
AMD says “The powerful combination of cores, memory bandwidth and I/O on AMD EPYC processors create a highly differentiated solution that can offer lower TCO for our customers.”
In other words, AMD is pushing the advantages its Epyc server processors (launched last year) have over Intel’s Xeon, and it just landed a very big win with AWS. Amazon is touting the advantages of Epyc as well. It announced that AWS customers who choose solutions powered by AMD Epyc silicon will be able to take advantage of a 10% price savings.
AMD 7nm Chips Coming
While the Amazon partnership was a big part of the AMD stock gain, the company made another announcement yesterday that is even more important in the long term.
The company will start shipping its first products featuring 7nm chips by the end of 2018. The new Radeon Instinct MI60 GPU ships to data centers later this year.
That will be followed in 2019 by consumer graphic cards using the technology, and PC processors built on AMD’s new Zen 2 architecture. Zen 2 processors will be manufactured using that 7nm process, and will include new hardware protection against Spectre attacks. The company says Zen 2 processors are currently in testing. Naturally, a 7nm version of Epyc (code-named Rome) is also on track.
Why the fuss about 7nm chips? They offer double the transistor density of AMD’s current processors, so they offer big performance gains. As Ars Technica explains, this gives AMD the option of reducing the power requirement by 50% while keeping performance on par with current generation chips, or keeping power requirements at the same level while boosting overall processing performance by 25%.
AMD’s move to 7nm is equivalent to Intel’s move to 10nm chips. The difference is that AMD is on track with its transition. Intel is struggling. First expected in 2016, Intel’s 10nm processors have been repeatedly delayed, rumored to be cancelled altogether, and now expected some time in 2019.
With its move to 7nm chips, Advanced Micro Devices is on track to not only beat Intel to market with next generation CPUs, the AMD versions are expected to offer superior performance to their Intel equivalents.
2019 Could be a Big Year for Advanced Micro Devices
AMD stock has doubled in 2018 — despite the drubbing it took after its last earnings report reflected the crash of the crypto-mining market.
The company is reportedly on track to take as much as 30% of the market for PC processors in Q4. Yesterday’s AWS announcement is a clear signal that AMD is making real gains in the enterprise server market as well. With its 7nm Zen 2 processors on track for 2019 — while Intel struggles with its 10nm transition — AMD is positioned to make further gains next year, and the days of Intel grabbing 80% or more of the world processor market could be well in the rear view mirror.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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