Equity research on AMD: unlocking value in a competitive industry

Abstract

This thesis provides an equity research analysis of Advanced Micro Devices (AMD), evaluating its financial performance, market strategy, and competitive positioning within the semiconductor industry. Over the past decade, AMD has transformed itself into a key player in high-performance computing, data centers, AI hardware, and gaming segments. The study highlights AMD’s strategic turnaround, starting with the launch of Ryzen processors in 2017 and subsequent market share gains against competitors like Intel and NVIDIA. Key partnerships with TSMC and acquisitions such as Xilinx and Pensando have strengthened its technological capabilities and broadened its revenue streams. AMD’s financial performance reflects its strategic priorities, with gross margins improving from 38% in 2018 to 51% in 2022, although softening slightly to 50% in 2023 due to rising operational costs. Regional analysis shows the U.S. emerging as AMD’s largest market, surpassing China, while Europe and Asia Pacific continue to demonstrate steady growth driven by cloud computing and AI adoption. Despite concerns about underinvestment, as seen in a declining Capex-to-D&A ratio and stagnating ROIC, AMD’s focus on innovation and liquidity positions it well for future growth. Valuation models, including DCF, APV, and EVA, indicate an implied share price range of $137.57 to $163.04, reflecting significant upside potential. This research concludes with a BUY recommendation, emphasizing AMD’s strong financial fundamentals, market adaptability, and long-term growth potential in the expanding semiconductor industry.