On Wednesday, Goldman Sachs (NYSE:GS) reaffirmed its stance on two major players in the semiconductor industry, showing confidence in Advanced Micro Devices, Inc. (NASDAQ:AMD) while maintaining a cautious view on Intel Corporation (NASDAQ:INTC). The firm reiterated its Buy rating on AMD with a price target of $180.00, citing the company's potential for market share growth in the server segment, despite a recent loss in volume share for the first time in four quarters in the fourth quarter of 2023.
AMD is expected to bolster its position in the enterprise market, with support from its transition to new generations of EPYC processors, including Genoa and Bergamo, and the upcoming introduction of Turin. Goldman Sachs also anticipates AMD to make strides in the Data Center GPU market and to expand its margins over the coming years, projecting an increase in non-GAAP gross margins from 50.4% in 2023 to figures ranging between 54.7% and 58.6% from 2024 to 2026.
Regarding Intel, Goldman Sachs acknowledged the company's strategic actions to reduce costs and invest in its Intel Foundry Services, but decided to maintain its Sell rating. The firm is waiting for signs of market share stabilization in Data Center Compute and progress in Intel's external foundry strategy. The analyst noted that large cloud hyperscale customers are likely to continue favoring accelerated compute over general-purpose compute in 2024, with market share expected to lean towards AMD and Arm-based processors.
Investors are advised to watch for early customer interest in Intel's upcoming products, Sierra Forest and Granite Rapids, which are seen as potential factors that could help Intel stabilize its market position in the server CPU market. Sierra Forest is scheduled to launch in the first half of 2024, followed by Granite Rapids, which is optimized for performance-sensitive and general-purpose workloads.
InvestingPro Insights
In light of Goldman Sachs' optimistic outlook on Advanced Micro Devices, Inc. (AMD), real-time data from InvestingPro offers additional context to their assessment. AMD's market capitalization stands robust at $271.26B, reflecting its significant presence in the semiconductor industry, which is supported by an InvestingPro Tip highlighting AMD as a prominent player in the Semiconductors & Semiconductor Equipment industry.
InvestingPro data further reveals that AMD's P/E Ratio is at a high of 329.28, with an adjusted P/E Ratio for the last twelve months of Q4 2023 at 317.3. This suggests that the market has high expectations for AMD's future earnings growth, despite 31 analysts revising their earnings downwards for the upcoming period, as noted in another InvestingPro Tip. Nonetheless, AMD's strong performance is evident with a 1 Year Price Total Return as of Y2024.D38 at an impressive 95.41%, indicating a significant appreciation in the stock price over the past year.
For investors looking to delve deeper into AMD's financial health and future prospects, there are additional InvestingPro Tips available. With a total of 19 tips, these insights cover a range of factors from net income growth expectations to liquidity and debt management. To access these insights, visit https://www.investing.com/pro/AMD.
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