Cloud demand remained healthy in March, thanks to strong graphics processing unit (GPU) growth, an analyst at KeyBanc Capital Markets said.
The Semiconductor Analyst: John Vinh has an Outperform rating and $165 price target for Advanced Micro Devices, Inc. AMD shares.
The analyst rates Intel Corporation INTC a Sector Weight.
Vinh has an Overweight rating and a $350 price target for Nvidia Corporation NVDA shares.
The Semiconductor Thesis: Cloud demand rose at a healthy pace of over 30% year-over-year in March, Vinh said. Total instances rose 2% month-over-month and 35% year-over-year in March compared to 2% and 34%, respectively, in February, he added.
Cloud growth, Vinh said, was primarily driven by Alibaba Group Holdings, Inc. BABA, which saw 9% month-over-month growth. This compares to 1% growth each for Microsoft Corporation's MSFT Azure, Amazon, Inc.'s AMZN AWS and Alphabet, Inc.'s GOOGLGOOG Google Cloud Platform, he added.
AMD Cloud instance's growth moderated after a strong February ramp, with a 4% month-over-month growth and 167% year-over-year growth, Vinh said. The company's Milan processor grew 6% month-over-month, as Alibaba rolled out new instances, he added.
The analyst also noted that Milan-X was launched at Azure across four regions.
Intel grew slightly, a 1% month-over-month increase and 28% year-over-year growth, the analyst noted. The chipmaker was helped by Alibaba expanding Ice Lake deployments and resuming some deployments for Broadwell, Cascade Lake and Skylake processors, he said.
The biggest increase, however, was for Nvidia instances, which increased 6% month-over-month and 31% year-over-year, the analyst said.
"The sequential growth was driven by Alibaba's increasing deployments for Ampere, while Turing, Volta, and Pascal also showed MSD growth m/m," Vinh said.
These results, the analyst said, are positive for Nvidia and AMD and neutral for Intel.
The Semiconductor Price Action: The iShares Semiconductor ETF SOXX slipping 2.48% to $428.80 on Friday, according to Benzinga Pro.
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