AMD's 'Next Horizon' Event: What You Need To Know

Advanced Micro Devices, Inc. AMD, which has seen strong product momentum for about two years now, is set to host its "Next Horizon" event Nov. 6 in San Francisco.

The chipmaker hasn't shed much light on details, except for the itinerary and a mention on its earnings call, describing the event as a platform for discussing innovation of products and tech.

This has set tongues wagging that AMD could disclose material information that could impact its stock price, given that the event was announced on its Investor Relations page. In 2016, the company hosted an event under the same name and used it to unveil the Ryzen brand.

The Analyst

Bank of America Merrill Lynch analyst Vivek Arya reiterated a Buy rating on AMD with a $30 price target.

The Thesis

The "Next Horizon" event is likely to see a general presentation and Q&A session with key company executives such as AMD's CEO, CTO, head of data center and head of graphics as well as an update on new 7nm data center CPU/GPU products, Arya said in a Friday note. (See his track record here.) 

The analyst expects a detailed update on specs and launch dates for the EPYC 2/Rome server CPU and Vega GPU optimized for data centers, along with an update on possible new customers, the analyst said. 

The Rome CPU is likely to go into production by 2019, and the Vega GPU by year-end, Arya said. 

The next-gen EPYC2, namely Rome, should help leverage AMD's existing engagements and accelerate share gains, according to BofA. 

Arya said Rome will based on Taiwan Semiconductor Mfg. Co. Ltd. TSM's 7nm, giving it parity with or a lead over Intel for the first time. Rome will feature a new node and more cores, he said. 

BofA expects cloud customers to come flocking to Rome's high performance and core, leaving the enterprise customers continuing with Naples. The firm expects Rome to be available by the first half of 2019, with major cloud customer ramps in the second half. 

Comparable product from Intel Corporation INTC, namely the 10nm Ice Lake, may not be available before 2020, the analyst said. 

The Street estimates AMD's 2018/19 server CPU sales at $324 million and $842 million, respectively, on the premise of unit sales of 524,000 and 1.3 million, accounting for a 2.6-percent and 6.5-percent share.

EPYC growth is likely help a 200-basis point gross margin expansion annually to 42-43 percent at AMD and achieve pro forma EPS toward $1/share by 2020.

Arya sees the event as a catalyst that could shift focus from near-term GPU inventory-related issues to a "generational opportunity" that would take share from incumbents such as Intel and NVIDIA CorporationNVDA and grow addressable markets in 2019 and 2020. 

The Price Action

AMD shares have nearly doubled year-to-date. The stock was down 1.65 percent at $19.89 at the time of publication Friday. 

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