Tepid PC Sales Don’t Stem Our Optimism for AMD’s Data Center Business; Shares Undervalued; $115 FVE

AMD reported fourth-quarter results ahead of our expectations thanks to strong data center and embedded (Xilinx) revenue. Although the firm corroborated Intel’s expectation of continued PC weakness and slightly elevated inventories at cloud customers, we remain positive on AMD’s data center business. We expect AMD’s latest 5-nanometer Genoa server central processing unit family to drive further market share gains at Intel’s expense. Shares look attractive relative to our unchanged fair value estimate of $115 per share, as we believe the market is overly concerned about weaker PC and gaming sales while discounting the rosy data center prospects for narrow-moat AMD.