Which Way Is Advanced Micro Devices, Inc. (AMD) Heading?

The PC gaming hardware market is expected to be worth more than $30 billion by 2015, according to a research report released by Jon Peddie Research. AMD is set to take a big share of the pie with its new “Unified Gaming Strategy,” wherein it would be working with game developers to make the games easily portable to PCs. In such case, NVIDIA may suffer as the upcoming games may not be optimized for its cards.

Bottom line

AMD has always played second fiddle to Intel. However, the company is now looking to develop newer revenue streams and the impact is expected to be visible on its stock price in the near future. While its gaming console win seems to be already factored into the market price, the long-term impact of the video gaming dominance is expected to provide a boost to the stock in the coming years.

Its new processor endeavors and microserver story also bid well for the stock price. The mainstream server market is currently dominated by Intel, which owns over 95% share of the segment. AMD has seen its revenue falling in the recent past and it expects to see the trend reversed as and when it starts shipping new microserver chips in 2014.

According to HP, microservers are expected to account for up to 15% share of the global server market, which roughly translates into $2 billion worth of market value. With its new chips, AMD is in the position to give tough competition to Intel and may command up to 40% of the market. This will translate into potentially a 15 to 20% increase in AMD’s revenue in 3 years, creating healthy upside to its stock price.

Raj S has no position in any stocks mentioned. The Motley Fool recommends Intel and NVIDIA. The Motley Fool owns shares of Intel.

The article Which Way Is AMD Heading? originally appeared on Fool.com and is written by Raj S.

Raj is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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