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AMD has a keen eye on the server microprocessor market and why shouldn’t it? After all, it once commanded a market share of close to 25% compared to a paltry 5.5% currently. Intel has consistently gained share in this market over the last few years, and going forward, ARM-based players such as Nvidia may likely make an entry into this market.
We wrote recently that AMD decided to acquire SeaMicro to strengthen its server market offering and prepare itself for future competition (see article AMD Picks up SeaMicro to Strengthen Server Market Offering). We believe that the company could also look to adopt the ARM architecture, especially for servers to help grow its presence.
See our complete analysis for AMD
AMD has stated that there is not much advantage of ARM over x86 architecture when it comes to notebooks and desktops. However, there are certain ways in which the ARM architecture could be beneficial for server applications. However, to gain traction in the server market, ARM will need to come up with a 64-bit processor which may take a few years. [1]
We believe that ARM might be part of AMD’s broader strategy to gain share in the lucrative server microprocessor market that offers almost 5 times the profits compared to notebook microprocessors. If AMD can regain its footing in the server market and recover the 25% market share it once had by the end of our forecast period, there is potential upside of about 15% to our price estimate.
Our price estimate for AMD stands at $9.16, implying a premium of a little under 20% to the market price.
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