Despite PC Softness, Advanced Micro’s Server CPU Share Gain Opportunity Is Promising; FVE Still $115

Advanced Micro Devices reported third-quarter results consistent with its negative announcement on Oct. 6. Revenue of about $5.6 billion was well short of management’s original guidance of $6.7 billion due to weakness in the PC market. We had been anticipating a slowdown in PC sales following robust demand in recent years from COVID-19-induced work- and learn-from-home trends. Nevertheless, the firm’s data center business continues to execute well with on-time product launches (including the upcoming 5-nm Genoa server CPU lineup) and we expect continued market share gains as Intel struggles with delays to its Sapphire Rapids server CPU family. Shares look attractive relative to our unchanged fair value estimate of $115 per share for narrow-moat Advanced Micro.