What’s AMD’s Upside From Its Push In Embedded Market With New Chips?

by Trefis Team
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With Epyc Embedded 3000 and Ryzen Embedded V1000AMD (NYSE:AMD) is looking to carve out additional space for itself in the embedded processors market. Should AMD push in this direction? We think so. First, the market opportunity is nearly $15 billion. In comparison, AMD’s total revenue from enterprise, embedded and semi-custom markets stood at $2.3 billion in 2017, suggesting meaningful room for growth. Second, the market for embedded processors is more stable, and less prone to architecture changes than PC consumer market. Therefore, the demand is likely to be more predictable, which lowers the risk for AMD. Third, Intel has less control over this market, relative to servers and consumer PCs, where it has captured a massive share. The reason is the presence of ARM-based processors. The next question that arises is: how much value can AMD add to its stock with its embedded market push? The answer obviously depends on how much additional share it can capture. We have created an interactive dashboard using Trefis’ interactive technology where you can modify inputs such as AMD’s embedded market share gain, embedded market opportunity, EBITDA multiple and EBITDA margin to determine potential upside for AMD if its new chips gain strong adoption.

We estimate that if AMD can capture an additional 10% share of the $15 billion embedded market, it would imply incremental EBITDA of $190 million, resulting in nearly $2 or 20% upside to our base price estimate of $10 for AMD. To see how we estimate our base price for AMD, see AMD’s Valuation Calculator. If you have a different view on market size, AMD’s potential success and other parameters, you can use our interactive dashboard to come up with and share your own estimate of potential upside for AMD from its new embedded chips.

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