AMD spikes after analyst says it could gain market share in 2 key areas

AMD chipA technician of computer microprocessors maker AMD poses for the media with a wafer at the chip plant in Dresden October 24, 2006. AMD celebrated its 10th anniversary of the AMD plant in the eastern German city of Dresden on Tuesday.Fabrizio Bensch/REUTERS

  • AMD was soaring Wednesday morning after an analyst initiated coverage and said he sees the chipmaker taking market share in key areas.
  • Shares were higher by 8%.
  • Watch AMD trade live.

AMD shares were soaring Wednesday morning, up more than 8%, after analyst said the company has an opportunity to gain share in the lucrative microprocessor space given its unique position in two key markets.

Specifically, Nomura Instinet analyst David Wong said the chipmaker can gain ground in both the x86 microprocessor and the standalone graphics-processor markets. Rivals Intel and Nvidia only focus on one of the markets, with Intel on x86 and Nvidia on GPU, he added.

Wong initiated coverage with a "buy" rating $33 price target - more than 20% higher than Tuesday's close.

"AMD has managed to lift from its market share lows in all categories of x86 microprocessors and GPUs," Wong wrote. "We think that this share momentum is likely to continue in the future."

He sees strong growth across a variety of products employing both x86 and GPU microprocessors as customers increasingly adopt electronic devices. Wong also noted that the companies faces near-term headwinds due to smartphone saturation, but that long-term demand remains intact.

AMD market share predictionsNomura

Wong believes adding market share will lead to strong gains in profitability - despite AMD's patchy earnings history. The company has recorded several quarterly losses over the past few years alongside the volatile chip market.

"We forecast AMD's reported GAAP EPS will climb through 2019 and rise meaningfully in subsequent years from roughly breakeven in the March 2019 quarter," he wrote. "We believe that at some point in the next few years, AMD will be able to demonstrate EPS power of $2.00 or more."

Nomura also initiated coverage on Intel with a "buy" citing gains in AI and autonomous driving, while rivals Nvidia and Xilinx were rated as "neutral".

AMD announced in January strong product upgrades with the launch of Radeon VII, a 7 nanometer GPU. The new chip provides twice the memory and significantly higher performance compared to AMD's other graphics cards.

In addition, the company scored a huge product win in March when Google announced it would use AMD chips for Stadia, its new gaming platform. AMD beat out rival Intel in supplying the cloud-based gaming platform.

Including Wednesday's gains, AMD was up 57% this year.

AMD stock chartMarkets Insider

Get the latest Intel stock price here.

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