Artificial intelligence could have saved the day for semiconductor companies in the fourth quarter, an analyst at KeyBanc Capital Markets said Monday.
Weak Industry Fundamentals: Broad-based demand trends remain weak, weighed down by continued inventory destocking in the auto and industry end markets, said John Vinh in a note. Despite the bottoming of the PC industry, demand trends remained weak, he added.
The analyst also noted weakness in the traditional server market and Chinese iPhone demand. On the flipside, Android smartphone demand sustained and AI server demand remained robust, he said.
“We see AI and Android handset-exposed names as best positioned into earnings, while anticipatingmoderate risk to analog names with outsized auto and industrial exposure,” said Vinh.
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Positive On AMD: Advanced Micro Devices, Inc. (NASDAQ:AMD) will likely post higher results and higher guidance, said Vinh. The analyst expects fourth-quarter revenue and earnings per share of $6.18 billion and 80 cents, respectively, compared to the consensus estimates of $6.12 billion and 77 cents.
The positive expectation is premised on strong server results amid improving Genoa demand, the analyst said. Genoa is AMD’s high-performance server processor based on the Zen 4 microarchitecture.
The analyst estimates first-quarter revenue and earnings per share of $5.98 billion and 77 cents, ahead of the consensus estimates of $5.76 billion and 68 cents.
Customer traction for AMD’s AI accelerator chipset MI300x is inflecting, the analyst said. This will lead to upside to the management’s 2024 estimate for over $2 billion in revenue, he said.
“Street sentiment on the name is incrementally positive, given signs of growing MI300X traction, and expectations of server share gains given the ramp of Genoa despite weak traditional data center demand,” KeyBanc said.
The firm expects investors to focus on customer engagements for MI300X, updates on theprior $2 billion revenue estimate, plus, the target for 2024, Genoa ramp and the status of PC recovery, and market share expectations versus Intel Corp. (NASDAQ:INTC).
The firm has an Overweight rating and $195 price target for AMD shares.
AMD is scheduled to report its quarterly results after the market close on Jan. 30.
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