Ok Here is my promised valuation exercise for AMD. Willing to learn. None of the following is GAAP number. So what you see in websites’ PE will not match here.
Q4 2023 (Oct-Dec)
There are 4 segments that AMD reports its earnings – Data Center/Client/Gaming/Embedded
Data Center (DC)
- 2023 Q1 & Q2 1.3B$. This was during the lean period of semiconductor world where companies were looking for a footing. AI entered the show and CPU investments took a beating. Q3 showed some recovery at 1.6B$ dollars. This was on the backdrop of meta deal with bergamo. Intel also commented in Q3 that their margins are down due to competitive pressure. Q4 AMD expects 400M$ in revenue addition due to shipment of MI300A to El Capitan super computer. We can treat this as one time. In addition to this, MI300X starts to ship end of December/Jan 24. Expecting oracle moving to AMD CPUs (first real enterprise win) and current amazing genoa and bergamo CPUs to contribute 400M$.I am keeping Q3 2.0B$ as baseline and 400M$ El capitan as added revenue. So I expect Q4 DC estimate is 2.4B$ without adding some MI300x revenue
Gaming and Client
I am keeping gaming+client flat – gaming should benefit from festival sales but msft saw slump in xbox. PS5 is doing well. They are expecting 19% rise from last quarter. PlayStation 5 shipped 4.9m units during Q2 2023 | GamesIndustry.biz – I am really unsure where amd is in client since we did not see a lot of phoenix laptops on time for back to school. I will keep it flat to be safe – 1.4B$ + 1.3B$ = 2.8B$
Embedded
Embedded is expected to see downturn. It started q3. So Q4 Embedded sales at 1B$
This will make it a Total of 6.2B$ for Q4 . For 2023 (5.3+5.3+5.8+6.2). That would be ~22.6B$.
Segment wise split for Jan-Dec 2023.
DC 6.6B$
Client 4.7B$
Gaming 6.2B$
Embedded 5.2B$
At an operating margin of 25% (average of couple of years) – that is ~5.5B$ earnings – 3.45$/share
At current price per share 148$ – PE of 43.
Now, regarding 2024 –
Coming to 2024 (Jan-Dec).
- Client – I will give it 1.3B$*4 = 5.2B$. Client s expected to make a comeback since we are reaching a refresh cycle which usually 3.5 years. Last big purchase was in 2021 (when everyone was buying laptops). We can safely say it will not go below 1B$ (The client macro was doomed in 2023 Q1/Q2 but even then it made 0.7 & 1B$. Q3 was 1.5B$). Intel controls this space but we can expect it will not be as bad as 2023. Expecting The new intel meteor lake processes to be used by OEMs for enterprise refresh (as is always the case). Intel will do everything to keep their last real bastion.
- Gaming – Not sure where this is going. Lisa Su says the peak is usually 3rd year after a product. I will keep it flat – 6.2B$
- Embedded – embedded is expected to see a slump and possibly revive H2 2024. Say Flat or down. Say 10% down – 4.6B$
-
Data Center – Expecting All else being equal and removing the 400M$ El capitan bump in 2023 Q4. We should see 6.2B$ without adding MI300X sales which I will come to now. MI 300X is expected to contribute 2B$ in sales as per Lisa Su in 2024.From what we see in the news reports, It appears that she is being very very conservative, How?
various leakers/estimates show that AMD is going to ship 200000 – 400000 units of MI300X. AMD MI300 Ramp, GPT-4 Performance, ASP & Volumes & https://link.medium.com/FlWlPnROMDb. I arrived somewhere at 15000$ per unit for MI300x (ball park betwen H100 which sells for 30000$ per unit and mi250x which is at around 8000$ per unit). Selling 200000-400000 unit at 15000$ gives 3B$-6B$ sales. Let us say 4B$ midway… Since by 2024Q4 B100 (nvidia blackwell) will makes its entry. and 400000 may not materialize (but this can happen since nvidia is still supply constrained).
-
CSPs 100% want an alternative – this is going for AMD
-
Nvidia lost its chinese market due to restrictions – that can cause supply increase elsewhere. So that is going against AMD.
-
Nvidia pulled in its cadence and B100 is coming 2024 end – That means AMD has to work on MI400x.
-
Lisa Su is conservative. In 2021, she guided less at the start and kept raising the guide up as the earnings came.
Overall we can assume they hit 250000 – 300000 sales – So 4B$ sales (15000$/unit) for MI300X alone makes sense.
So overall, for Datacenter, we can expect – 6.2B$ + 4B$ = 10.2B$ sales
Segment wise split for Jan-Dec 2024.
DC 10.2B$
Client 4.6B$
Gaming 6.2B$
Embedded 5.2B$
Total 26.2B$ Revenue in 2024.
At an operating margin of 25% (average of couple of years) – that is ~6.5B$ earnings – 4$/share
At current price per share 148$ – PE of 37.
Looking beyond
- Expecting MI400X to be even better than mi300X which was never made for AI. MI400X will have IPs specifically made for AIs.
- Not to mention even better software parity.
- The only open source alternative compared to NVDA walled garden
- No one knows where is Intel Gaudi3 and its myterious customer (some rumour said they are shipping large to a customer) – who is going to buy it knowing that, that is a dead end roadmap? Since it will get merged with falcon shores. A different platform altogether
- This leaker again says AMD’s AI shipments will be 30% or more of NVDA’s in 2025. So supplies are not going to be a problem. Considering the fact that AMD does chiplets with better yield per chip compared to Nvidia, AMD can bring the price down to make itself competitive w.r.t the cuda moat while still maintaining the margins. nvidia blackwell is chiplet or multi chip module (which means reticle limit and bad yields again)?
- AMD is making some strategic partnerships with others like broadcom and giving access to design IPs to infinity fabric (Like they did for broadcom). This will have a long term strategic impact and definitely help reach the uniform scaling that NVlink gives.
- The perception is that nvidia is competing with CSPs and AMD is working with them.
- Current DC revenue share is 30% according to Forrest Norrod. AMD is heading to 40% before Intel can respond to genoa and bergamo
@kondal_investor Requesting your valuable feedback since I am weak at financials and valuation. Others too. Please chime in so that I can learn a thing or two.
