Intel PC inventory oversaturation ‘a best case’ scenario for AMD: Analyst

Susquehanna International Group (SIG) Senior Equity Analyst Christopher Rolland joins Yahoo Finance Live to discuss AMD earnings and tailwinds for the stock.

Video transcript

DAVE BRIGGS: All right, for more on AMD's latest earnings report, Chris Rolland, Susquehanna International Group Senior Equity Analyst, joining us now. Good to see you, sir. Interesting report-- looks like a rough guidance but a pretty solid beat on the top and the bottom. Your initial reaction, Chris.

CHRISTOPHER ROLLAND: Yeah, I think Intel set an incredibly low bar. And while this was not a perfect report, it probably hurdled that low bar for sentiment.

SEANA SMITH: Chris, what do you make of the client segment just in terms of revenue here? Because a miss-- $903 million, the expectation on the Street was for $995.5 million. Clearly, the cooling PC market having an impact on that segment. How weak-- or is this the weakest you think that segment is going to get?

CHRISTOPHER ROLLAND: That was actually a little bit better than we had expected. We were probably the bear on the street around this segment. In PC right now, Intel has essentially stuffed the channel full of PC inventory. And so this actually is a result that we think is a best case for AMD as they work through all of this inventory throughout the channel. We think there's multiple billions of dollars of CPU inventory that needs to be worked through.

DAVE BRIGGS: They offered some commentary that demand was mixed, but they project gaining market share in 2023. Do you agree with that assessment?

CHRISTOPHER ROLLAND: I do. I think they have a new, revamped GPU lineup that will better compete with NVIDIA this year. So I do see some gaming potential here.

SEANA SMITH: Chris, what about the data center business? Because unlike Intel, we've really seen AMD's data center business grow a little bit. Taking a look at these numbers, actually came in slightly better than what the Street was looking for at $1.66 billion. What do you make of that report-- that number?

CHRISTOPHER ROLLAND: Yeah, so we think this is just the start for them in gaming. They have a new CPU chip called the Genoa, which we'll be going head to head with Intel's Sapphire Rapids. We think it has as much as a 50% performance beat over Intel. And so we expect AMD to not only benefit from better ASPs-- server ASPs, but also taking a ton of share here for probably the next two years.

DAVE BRIGGS: Some tailwinds and some headwinds when it comes to the Biden administration. We'll start with the CHIPS Act, which should be a net positive. And then there's the chip restrictions in terms of what they send to China. How do those play into the future?

CHRISTOPHER ROLLAND: In terms of subsidies from things like the CHIPS Act, AMD is primarily manufactured out of Taiwan. They are third party foundry manufacturing. And therefore, they will not get anywhere close to the benefits that Intel will be getting from things like the CHIPS Act.

In terms of Chinese restrictions, that's still a TBD. As of right now, general purpose processors are able to ship into China. And so we don't see this, as of right now, being a big issue.

SEANA SMITH: Well, Chros, speaking of some of the weakness more broadly that we're seeing in this sector, we had Intel CEO Pat Gelsinger on Yahoo Finance last week following their weak report. I want to play what he told us and then get your reaction.

PAT GELSINGER: Numbers that basically we haven't seen for the company for a decade-- projecting losses that we haven't seen for 30 years. It's very difficult. And that's what we laid out for Q1-- a very tough picture, but one that I'm confident that we'll navigate through and we'll make the company better as a result.

SEANA SMITH: Chris, what needs to happen to get the environment, to get this picture much stronger when it comes to all of these chipmakers?

CHRISTOPHER ROLLAND: All of the chipmakers is a bigger discussion. But in terms of Intel itself, Intel needs to focus on process and products. They have a roadmap. They've laid out a roadmap. If they can hit those points in its roadmap, they will likely be able to compete with AMD and TSM over the long run.

But if they cannot hit this roadmap and if it slips, like it has in the past few years-- over the past five years, it's slipped incredibly-- Intel is in a very, very difficult situation if they cannot hit those milestones in their roadmap.

DAVE BRIGGS: Chris, biggest question you have for the call.

CHRISTOPHER ROLLAND: For AMD, I haven't seen some full-year guidance. So I want to know about that. I want to know about the outlook. I want to know about the trajectory.

I want to know about the recovery in client. I want to know if they're going to take share in PC. I know they'll take share in server, but is their expectation to take share in PC as well? These are the things that are most top of mind to me.

SEANA SMITH: And the stock up nearly 4% here after hours-- Chris Rolland, thanks so much.