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AMD's EPYC Gains Cloud Customers: Should INTC, NVDA Worry?

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Advanced Micro Devices AMD is rapidly gaining footprint among cloud computing and datacenter providers, thanks to its EPYC processors.

For instance, Alphabet’s GOOGL Google is leveraging EYPC processors to enhance data center environment and strengthen Google Cloud Platform. Moreover, Amazon (AMZN - Free Report) , Microsoft MSFT, Oracle and Tencent are utilizing EPYC processors to enhance their respective data center architecture.

This is also helping AMD, which carries a Zacks Rank #3 (Hold), to improve its competitive position against the likes of Intel INTC and NVIDIA NVDA.

The companies have returned 28.7% and 87.1% in the past year, respectively. AMD’s shares have skyrocketed 135.3% in the past year, significantly outperforming the industry’s growth of 56.6%.


One Year Price Performance

EPYC Adoption Strengthens AMD’s Prospects

Google Cloud recently announced the beta availability of N2D VMs on Google Compute Engine powered by 2nd Gen AMD EPYC processors.

Moreover, extended utilization of its 2nd Gen EPYC processors by Amazon Web Services, in Amazon EC2 (or Elastic Compute Cloud) compute-optimized instances, namely C5a and C5ad is a key catalyst.

Further, Microsoft Azure HBv2 virtual machines are leveraging AMD’s EPYC 7742 processor for HPC applications.

Moreover, in enterprise domain, Dell has rolled out new platforms based on EPYC processors. Considering HPC vertical, San Diego Supercomputer Center intends to utilize Dell EMC PowerEdge servers powered by AMD’s second Gen EPYC processors.

Notably, higher EPYC server processor sales drove AMD’s Enterprise, Embedded and Semi-Custom segment (21.9% of total revenues) revenues in the fourth quarter of 2019.

Intel’s Data Centric Business Growth Noteworthy

It would be foolish to ignore Intel and NVIDIA’s endeavors in the cloud and datacenter space.

In the fourth quarter of 2019, revenues from Intel’s data-centric businesses came in at $9.44 billion (46.7% of total revenues), up 6% collectively on a year-over-year basis. Strong mix of high-performance second-gen Xeon Scalable processors and solid demand for Cloud service providers (CSP) led to the upside. CSP revenues improved 48%.

Intel’s data-centric business unit has been gaining from growing clout of high-performance Cascade Lake family of Xeon processors integrated with deep learning tools to accelerate AI processes.

Further, the processors are integrated with Intel’s Optane DC Persistent Memory solution, which is witnessing rapid adoption. Markedly, Intel’s Optane DC Persistent Memory modules are being leveraged by the likes of Oracle (ORCL), SAP, Google, Microsoft, Baidu and Alibaba.

Notably, this Zacks Rank #2 (Buy) acquired Habana Labs in the reported quarter, thereby strengthening its AI portfolio for the data center. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Moreover, Intel’s third-generation Xeon scalable processor, Cooper Lake, is set to be launched in the first half of 2020.

NVIDIA Copes With Competition

NVIDIA intends to focus on new growth drivers for its data center business such as inference, data science and machine learning techniques.

The Zacks Rank #3 (Hold) company anticipates datacenter TAM to more than double to $50 billion by 2023. Most preferred by datacenter operators, NVIDIA’s GPUs are likely to help the company grab a larger market space. The acquisition of Mellanox is a key catalyst in this regard.

In fourth-quarter fiscal 2020, revenues from Data Center increased 43% year over year and 33% sequentially to $968 million. Hyperscale demand was driven by purchases of both training and inference products in support of key AI workloads such as natural language understanding, conversational AI and deep recommendators.

Hyperscale demand is also driven by cloud computing. AWS recently made T4 available in every region. T4 excels at a wide array of high-performance computing workloads, including AI inference, cloud gaming, rendering and virtual desktop.

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