AMD: From Underdog to Market Leader - A Leap into the Billion-Dollar Business

Ten years ago, the shares of Advanced Micro Devices were trading at merely 3 dollars per share. At that time, the chip manufacturer struggled hard to compete with Intel in the x86 CPU sector and Nvidia in the discrete GPU market. However, under the leadership of Lisa Su, who took the helm at AMD in October 2014, the company achieved a remarkable turnaround. By developing more powerful chips, expanding its product portfolio with custom and embedded chips, and leveraging Intel’s mistakes, AMD significantly improved. Today, the stock price stands at an astonishing 170 dollars, and an investment of 20,000 dollars at the then price of 3 dollars would have grown to 1.13 million dollars. These impressive gains raise questions about why AMD has been so successful and whether it can continue this trend. Past challenges, such as the flawed acquisition of ATI and issues with transitioning to new chip sizes, resulted in dramatic market share losses for AMD. Yet, Lisa Su's strategic course, particularly the collaboration with Sony and Microsoft on gaming consoles and the development of innovative Ryzen and Epyc processors, brought the turnaround. By switching to one of the world's most advanced chip manufacturers, TSMC, AMD positioned itself optimally to take advantage of Intel’s delays and market mishaps. Simultaneously, AMD began producing lower-cost Instinct data center GPUs to meet demand in the artificial intelligence sector. The acquisition of Xilinx was another smart move to gain a foothold in the booming AI market. The pressure on Intel could further increase with the sale of Altera, a major competitor of Xilinx. Analysts anticipate an annual revenue growth of 20% for AMD from 2023 to 2026, while earnings per share could rise by 101% annually. Even though the stock is valued at 50 times the projected earnings, the rapid growth could justify this premium valuation. Continued growth could drive the stock price to 1,600 dollars by 2035 and increase the market capitalization to 2.6 trillion dollars. Therefore, a strategic investment in AMD can still yield significant returns in the future.