00:00 Speaker A
the managing director and senior semiconductor research analyst at Cody Acre. Cody, it is good to see you. So AMD reports, what do you make of the results, Cody?
00:13 Cody Acree
Yeah, they look like strong numbers to me up about 300 million this quarter and about a similar amount for September. Uh the bottom line is a little iffy, uh, given that they’re just in line with the consensus, 48 cents for June. And then, uh, the bottom line for next quarter, uh, they don’t give
00:48 Cody Acree
uh, an EPS guidance, uh, but they are saying that it excludes any China shipments, which we expect them to get back into China quickly, uh, as the Trump administration has relaxed those guidelines. And so, um, that number 800 million came out of the June number. And so if you add that back in, then you’ve got, uh, a really nice upside this quarter. And if you add anything back into September, then that 400 million turns into probably something closer to a billion dollars of upside. And so I think overall it’s a very strong number and hence the stock reaction after hours.
01:39 Speaker A
Cody, let me ask you a a key issue that obviously, you know, your colleagues on the street are asking broadly, Cody, how big is the AI opportunity for AMD, for Lisa Su’s company with China sanctions reversed?
02:06 Cody Acree
Well, with China sanctions, it’s about a billion and a half, uh, that they expect that they lost this last two quarters. And so, uh, I think that reverses pretty quickly. Uh overall for AI, uh, it’s a huge opportunity because you see what Nvidia is doing, and really AMD is the only viable alternative outside of the custom ASICs that the hyper scalars are doing. So if you want general purpose CPUs and every server has to run on a general purpose CPU, uh, to handle all the back office and all the coordination of these hyper scalar data centers, um, then if you’re looking for an alternative to Intel or Nvidia, AMD is really the only game in town and they’ve been really eating Intel’s lunch from a performance standpoint and from a price and performance standpoint versus Nvidia. They’re also very, very good alternative. So I think the upside is really unlimited for AMD. It’s just a matter of, uh, can they capture it? And I think so far they are starting to.
03:50 Speaker A
Cody, you mentioned Nvidia. When you think about AMD’s latest and greatest AI chips,
04:00 Speaker A
how would you stack them up versus Nvidia? Is there a performance gap there?
04:07 Cody Acree
Well, with their MI 350, uh, they’re they’ve really closed the gap. Uh, with their 400, they’re getting some performance advantage. Really where AMD gets the biggest advantages in their their memory bandwidth, uh, their ability to throughput faster data. Uh, and so on a processing to processing basis, AMD likely still trails in video somewhat, but they make what they make up for or lack in processing, they make up for in memory bandwidth. And that’s really their strength and that’s that’s really the, uh, the the, uh, the gating factor for these hyper scale data centers is how fast can they push product through these processors. Uh, it’s not necessarily absolute processing speed, but it’s the bandwidth of memory, uh, that is the limiting factor.
05:13 Speaker A
Chris, I want to get you in here because Cody, and Cody likes this name. I know he tells his clients this one’s a buy. You’re not such a fan, Chris, of this this one. Explain why.
05:31 Chris
Well, it isn’t that we’re not a fan, right? You know, when you look at the pro portfolio, we we have shares in Nvidia and we have shares of Marvel and you know, uh, I I think Cody said, if I remember correctly, that AMD is a viable alternative after some of the custom ASIC chips that the hyperscalars are doing. You’re talking about, you know, Amazon, Meta, Microsoft, Alphabet. That is one of the angles that Marvel offers us opportunity into those custom ASICs as well as writing the overall wave of AI and data center demand. Marvel also has the, uh, you know, enterprise networking and the carrier infrastructure, which I see really benefiting from incremental capital spending as AI adoption continues to rise.
06:35 Speaker A
Cody, your your response to Chris’s comments there.
06:40 Cody Acree
I completely agree with Chris on that. Uh, the ASIC vendors, uh, the Marvels and Broadcoms of the world are really coming on into their own as the hyperscalars are continuing to lean into custom solutions. Uh, they’re wanting tailored specific solutions for their very tailored specific workloads. And so, uh, they don’t need to pay for all the overhead of a general GPU that is Nvidia, uh, if they’ve got a very specific workload that they need to customize for. And, uh, with these ASIC vendors, they’re able to do exactly that and provide a much cheaper internal solution that is that meets only the needs of the hyperscalars individually. And, um, and I think that that’s a big market going forward. But, uh, there’s also the need for general purpose GPUs CPUs. Uh, and so, uh, I think that AMD can bridge in between, uh, because you do need CPUs to run even those hyperscale servers that are running Marvel and Broadcom chips. They have to have CPUs to manage all that backlog or that back office workload. And so, um, I think that AMD is a very, very nice alternative to Intel today, is what we’ve seen. And, uh, and and to Nvidia’s Grace Hopper or Grace CPU that, uh, that is is entrenched in their Blackwell processor.
09:12 Speaker A
Cody, how should investors think about the 232 tariffs and what that could mean for AMD’s financials?
09:26 Cody Acree
Well, the the tariffs are are less of an issue, I think, uh, only because, uh, these processors are are being built largely, uh, in in Arizona. And and so these are domestic, uh, production into domestic data centers. And so I don’t think tariffs are going to be a major issue. Uh, there are issues as, uh, AMD starts to ship into China, uh, and any restrictions into China, but I don’t think that that tariffs are going to be a major concern.
10:16 Speaker A
You know, Cody, AMD offered what looked like a solid forecast here. You see the shares are slipping here at least, you know, in the after hours. What do you chalk that up to, Cody, potentially? Was this just a very high bar heading into this print?
10:35 Cody Acree
Yeah, I think so. I think that AMD has had such a run that almost anything was going to cause some profit taking. Um, only an absolute blowout number, uh, was going to probably keep investors happy. And so I think that anything close to the the bottom line in-line June number and what probably will shake out to be close to, uh, the bottom line September number, uh, is going to be an excuse for traders to take profits. And and I don’t blame them for that. Uh, but I do think in the long run, AMD is a great investment, uh, and it will grind higher, um, following any any quick trading volatility.
