Advanced Micro Devices Inc (AMD)

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Advanced Micro Devices (AMD) Shares Gain on Revenue Outlook Boost as Chip Supply Chains Improve
By: TheStreet | April 28, 2021

• AMD CEO Lisa Su said improvements in chip supply chains allowed for a boost in full-year revenues forecasts, but memory giant SK Hynix sees a longer-lasting shortage.

Advanced Micro Devices (AMD) shares traded higher Wednesday after the chipmaker forecast solid current-quarter sales and a robust full-year outlooked pinned on improving demand and a loosening of tensions in the global semiconductor supply chain.

AMD said it sees June quarter revenues in the region of $3.6 billion, with a range of plus or minus $100 million, and a non-GAAP gross margin of 47%. For the full 2021 financial year, AMD said it sees revenues growing 50% from 2020 levels, indicating a total of around $14.65 billion, as bottlenecks fade and supplies slowly increase over the second half of the year.

That followed a better-than-expected first quarter that saw earnings rise 150% from last year to 45 cents per share, with revenues up 92% to $3.45 billion as it stole share from rivals like Intel INTC in the PC market and doubled-down on its dominance in gaming chips.

"The entire semiconductor supply chain is very, very tight. I think you hear that from all of our peers in the marketplace," CEO Lisa Su told investors on a conference call late Tuesday. "That being said, we've been working very closely with our supply chain partners. We have seen improvements that have led to the improved full-year guide."

"We're going to continue to work on that because right now, I would say the channel -- the inventories are very low throughout the entire supply chain, whether you talk about at our customers or in the channels," she added. "And whether you're talking about consoles or you're talking about PC gaming or you're talking about the overall sort of gaming ecosystem, there's a significant demand. And so we believe there's strong demand, and we're continuing to ramp supply to meet that."

AMD shares were marked 0.5% higher in early trading Wednesday to change hands at $85.65 each, a move that would trim the stock's year-to-date decline to around 7%.

Su also told investors that it passed a "major milestone" in its $35 billion acquisition of Xilinx Inc. (XLNX), a data-center chip specialist based in San Jose, California, following shareholder approval earlier this year.

Chip demand surged last year amid the work-from-home shift triggered by the global coronavirus pandemic, lifting worldwide sales by 6.3% to just under $640 billion.

That demand looks set to continue well into this year and next, as well, as economies move out from the pandemic's grip and government's stoke investment in green technologies.

The February deep freeze in Texas, however, shuttered factories run by Samsung Electronics, the world's biggest chipmaker, adding to supply-chain issues that were first triggered by a damaging fire at a Japan-based factory run by Asahi Kasei Microdevices.

SK Hynix, the world's second-largest maker of memory chips, warned Wednesday that inventories will remain tight "throughout the year and become even tighter in the second half of this year", adding it will bring forward spending plans allocated for 2022 in order to meeting rising demand and market shortages.

"AMD posted a nice first quarter beat and second quarter raise, and it raised its full-year revenue growth outlook to up ~50% (vs. prior up ~37%)," said KeyBanc Capital Markets analyst Weston Twigg, who carries a sector-weight rating on the stock. "Demand remains strong, and AMD has been able to increase its chip supply while maintaining solid gross margins."

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