According to new projections from investment bank KeyBanc, chip designer Advanced Micro Devices, Inc (AMD) is on track to outperform analyst sales estimates for the fourth quarter of last year. In a report released last week, KeyBanc stated its expectations for the current earnings season, predicting that AMD will not only beat its guidance and analyst estimates for the fourth quarter of 2021 in its earnings report due in February but will also perform well this year due to a growing presence in the enterprise and cloud-computing sectors.
The whole report, which can be found here, details the company’s forecasts for the current earnings cycle, which was kicked off earlier this month by Taiwan Semiconductor Manufacturing Company (TSMC) for the major market players.
It focuses on AMD and mentions the firm multiple times throughout the article. AMD is expected to post $4.633 billion in revenue in its fourth-quarter 2021 earnings report, which is coming next week, according to KeyBanc. This projection is greater than AMD’s $4.6 billion outlooks stated in its Q3 2021 earnings announcement, as well as consensus Wall Street estimates of $4.52 billion.
KeyBanc is bullish on AMD’s server market share this year, predicting that, compared to a market share of 11 percent to 12 percent in 2021, the firm will virtually double its presence in the segment this year, with a share of 20 percent.
As the investment bank outlines:
We see AMD benefiting from strong demand in the cloud data center, with increased traction at CSPs, such FB and particularly at MSFT Azure, where we anticipate the rollout of Milan (link) should be a key driver of near-term upside. Having secured meaningful incremental wafer and substrate capacity, we anticipate AMD’s market share in servers to reach over 20% vs. 11-12% in 2021. We are looking for AMD to report higher 4Q21 results and higher 1Q22 guidance.
According to KeyBanc, AMD’s cloud data center growth will follow the market’s overall trend, which is expected to increase by 18 percent this year. This paper also discusses the current semiconductor supply chain situation, warning readers that while inventories are high when compared to historical levels, this is exaggerated due to ‘kitting’ concerns and other impediments. The fact that the majority of inventory expansion is in the form of raw materials rather than finished items reflects this.
KeyBanc elaborates on the constraints by stating that:
We don’t expect these issues to negatively impact results in the NT, as the risk is being taken on by the distributor and any pushout of orders related to incomplete kits is being offset by price increases. As these kitting issue imbalances increase, there are concerns that this could ultimately result in an inventory correction in 2H22 [EMPHASIS OURS].
Harsh Kumar of Piper Sandler shares the idea that inventory adjustment in the chip sector would occur in the second half of this year. Kumar highlighted words made by an Infineon Technologies AG executive in a note posted yesterday to express his expectation that the inventory correction will begin in the second half of this year or 2023.
As a result, chipmakers will have limited room to raise prices further, and their margins would be squeezed, according to Kumar.
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