A solid fourth-quarter beat and raised guidance from Advanced Micro Devices, Inc. AMD after the close on Tuesday is a sign of things to come in the semiconductor sector.
According to Wedbush’s equity hardware analyst Matt Bryson, longer-term growth in the sector will be driven by increased content requirements tied to ongoing and future technology ramps.
Bryson made several comments on the sector during this week's “Wednesday’s With Wedbush” segment on PreMarket Prep Plus.
Update On Chip Shortages: Bryson offered up a few comments on the recent supply chain shortages in the chip sector. He narrowed it down to the winners and losers from the scarcity.
One of the winners is Apple Inc AAPL, which keeps in close contact with its suppliers and is often “one or two steps” of the issue and is able to prevent disruptions in production, the analyst said.
On the other hand, Sony Group Corp SONY, even if it is able to meet its goals, is going to ship “a lot fewer Playstations than they did last quarter or even a year ago and will be missing their target by almost 30%,” Bryson said.
Similarly, Western Digital Corp WDC “cannot make enough enterprise hard-drives, because they cannot get the components,” the analyst said.
Overall, Bryson does not predict the overall chip shortage will be resolved until sometime in 2023 due to the strong demand for semiconductor chips.
What Will Drive Long-Term Demand? With respect to the metaverse, Bryson views a rapid increase in demand to develop sooner rather than later.
He expects the catalysts that drove demand in 2020 and 2021 to be the main drivers.
The primary demand is for 5G chips, the analyst said.
"By far communications is by far the biggest demand for semiconductor chips."
Following that, the increased chip demand is needed to augment growth in the EV market, he said. This is evidenced by the “larger order books by the larger manufacturers that need chips to be fulfilled.”
This is all ahead of the acceleration in chips to expand the metaverse in 2023-2024, Bryson said.
Evaluating AMD's Q4 Report: "There is not much not to like about the report,” the analyst said of AMD's Tuesday earnings print.
The only year-over-year decline was seen in data center graphics, and "that is not a huge part of their business," Bryson said.
What he was most impressed was AMD's strong guidance. For the year, the company guided wto 31% growth, while the Street was at 20%.
On the gross margin side, AMD's 51% target was just above the Street’s estimates.
Bryson would not be surprised if AMD, with its business makeup, is able to exceed the higher guidance.
Bryson has a price target on the issue of $165, which was made after AMD's third-quarter report.
The full discussion with Matt Bryson from Wednesday’s broadcast can be found here:
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