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AMD-Wafer-Porn

A week ago, AMD's stock was trading at $14.25, virtually its highest level in five years. As of this writing, the stock has fallen to $10.89, a drib of nearly 25 per centum. The company has been slagged by investment analysts over the past week. While I'one thousand not an investor and make no comment on the value of investing in AMD or any other technology visitor, I do occasionally write nearly whether specific reports are backed up by a visitor's roadmap or current engineering science portfolio.

In this latest case, a Morgan Stanley annotator named Joseph Moore wrote AMD's "primal outlook is not quite as robust as microprocessor momentum has been ho-hum to build, offset by cryptocurrency gains. We believe that AMD'south graphics surge has been acquired past a sharp increase in sales of graphics fries to cryptocurrency miners. We wait this to meaningfully decelerate next year."

Moore went on to write that he expected GPU cryptocurrency mining to fade out, with cryptocurrency graphics sales falling past 50 percent (costing AMD $250 1000000 in revenue), with panel sales down 5.v percent in 2018 likewise.

Many of these stock weightings seem to exist based on a mistaken idea that AMD CEO Lisa Su told analysts Vega, non Ryzen, was responsible for the majority of the company's earnings concluding quarter. Let'due south review the conference call. Quotes below are from Su herself:

Looking at our Computing and Graphics segment, we made splendid progress in the Q3, as the continued success of our Ryzen family unit of CPUs, combined with significant graphics growth, resulted in a 74 percent increase in Computing and Graphics segment revenue year-over-year. Client calculating acquirement increased past a strong double-digit percent from a year ago…Ryzen 5 and Ryzen 7 processors have ramped well in the desktop channel marketplace, reaching 40 to 50 pct desktop market share at strategic e-tailers worldwide…

In graphics, we achieved record GPU revenue in the quarter based on significantly improved ASPs and higher unit shipments from a twelvemonth agone.

AMD exec Devinder Kumar after announces, "Computing and Graphics segment revenue was $890 million, up 74 percent year-over-yr, primarily due to strong sales of our Radeon graphics and Ryzen desktop processors."

The mistake well-nigh people seem to be making is in assuming Devinder's use of the word "primarily" applies solely to the ramp of Radeon graphics. We have multiple pieces of information that this is not and so. First, Lisa Su gives no data on how much GPU revenue has increased. She specifically does state client calculating revenue (CPUs) increased by a "strong double-digit percentage." Furthermore, she states Ryzen v and Ryzen 7 had achieved a twoscore-50 percent desktop market place share. That tracks with what nosotros've been observing at Amazon since Ryzen launched; AMD continues to reliably control 6-9 SKUs in Amazon'south Top twenty. As of this writing, AMD holds the 2nd, 7th, 8th, 11th, 12th, 14th, 18th, 19th, and 20th spots. Prior to Ryzen's launch, AMD held ii to three spots in the Meridian 20, and the increase nosotros just referred to is a tendency we've at present been mapping for viii months. Information technology'south non a flash in the pan. For comparison, AMD has two spots on the Superlative 19 GPUs listing, and neither belong to a Vega SKU. (One GPU slot is held past a ability supply, for reasons that escape me.)

It is certainly possible a reject in cryptocurrency revenue would whack demand for AMD GPUs, merely AMD has made information technology clear that it isn't basing its forecasts effectually bullish cryptocurrency demand. When asked to give details on AMD's expectations for cryptocurrency demand, Lisa Su responded: "We run into Vega ramping as nosotros become into Q4. We see that from an OEM ramp standpoint. Nosotros encounter that from a GPU compute standpoint. And that's offset with a picayune fleck of leveling-off of the blockchain demand."

If blockchain demand declines in 2018, it means GPU prices volition come back downward out of the stratosphere and consumers should really have more opportunities to buy these cards, while AMD'south price construction should also improve as HBM2 yields and availability both rise. This may non offset the decline in revenue, but we should run into at to the lowest degree some improvement there. And again, AMD has been clear it simply isn't leaning on cryptocurrency when it talks about its major revenue drivers in 2018.

As I've said, I don't claim to be a stock analyst and I don't know what the value of AMD's stock "should" be. Merely from where I sit, in that location'southward been an inappropriate accent on Vega equally some supposed driver of AMD's profits, even though AMD's GPUs historically never did that, fifty-fifty during the Bitcoin blast. Here's the proof:

amd-gpu-revenue

AMD's best year wasn't 2012 or the kickoff one-half of 2013, when BTC mining was moving to GPUs, only in 2010 when Fermi was delayed until Apr and lower-cost cards didn't announced until the fall of that year. From 2008 to H1 2013 (before the new consoles launched) AMD'south operating income on its GPUs waspartial. Sure, at the fourth dimension, AMD's CPU business was even worse, but that doesn't mean the GPU partition was driving huge profits or a robust return on investment.

GPUs were critical to AMD's future because they gave its APUs the graphics solution they needed to even attempt to compete with Intel, while simultaneously providing the IP that gave AMD the Xbox One and PS4 wins that kept it afloat from Q3 2013 to the present day. But evaluated in their own correct, GPUs were not and have never been a major profit generator. AMD doesn't really benefit from cryptocurrency-inflated prices because AMD isn't the one selling its cards at inflated price points–that'southward the ODMs like MSI, Asus, Sapphire, etc.

All of the evidence suggests Ryzen is driving AMD'southward recovery much more and so than Vega, peculiarly given GPUs have never been a major profit driver for the visitor exterior of its design wins in the Xbox I and PS4. If Ryzen continues to ramp as strongly equally it has, it should more than kickoff declines in cryptocurrency sales, especially as EPYC shipments begin. AMD may not take much of the server market place in absolute terms next twelvemonth, but when you lot're starting from zero as of gain is additive. Declarations that momentum has been slow to build are historically incorrect.

Opteron

AMD launched its first server CPUs in June 2001. Opteron launched on April 22, 2003. AMD's server market place share ticked up modestly at the end of that twelvemonth, simply didn't really begin to grow until June of 2005 (AMD launched its showtime dual-cadre server parts in April of that twelvemonth). In other words, while we recall Opteron as seizing a big per centum of the microprocessor market place, it took Sunnyvale a full 4 years to go from inbound the server market to rapidly gaining share within it. You have to walk before you can run, and AMD's careful arroyo to rebuilding its own market share is exactly what the state of affairs calls for.