The global economic headwinds continue to breed surprises in the tech industry with big companies dropping in revenue figures while the underdogs move up.
On Friday, AMD surpassed rival Intel’s market cap for the second time.
AMD recorded $153 billion market capitalization after its stock rose over 3%, pushing the chipmaker up above Intel whose shares fell nearly 9%.
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Intel’s market cap dropped to $148 billion on Friday after trading, missing all revenue expectations.
Intel has been working to boost earnings through acquisition. The company has also made some internal changes as revenue growth continues to decline. With many of its clients such as Apple, opting to develop their own chips, Intel needed to take drastic steps to sustain its revenue growth.
While there has been some improvement following Intel’s attempts to sustain its market position, AMD’s new position marks a significant shift in the market.
As CNBC noted, even though the shift is mostly symbolic, it signifies a much more competitive market for PC and server chips, where the two companies compete directly. It also suggests that investors may value an asset-light chipmaker over one that’s investing heavily in manufacturing. AMD outsources production to outside “fabs,” or chip factories, whereas Intel has said it plans to continue building and operating plants.
The battle to contain global chip shortage has propelled a massive investment in the semiconductor industry recently. For underdog companies like AMD, high demand of chips means an opportunity to expand growth.
With the company’s product quality having improved in recent years, AMD chips have a found a competitive edge against big players in the industry. AMD chips are notably squaring up with Intel’s products in terms of performance, even surpassing their speed and efficiency for some applications.
Intel shares fell 9% at the second quarter of the year following earning reports that fell short of expectations. The company’s shares price has significantly dropped by 23.0% for reasons attributed to lockdown in China, logistics challenges, decrease in demand for PCs and the 25% increase in the price of processors since the beginning of the year.
AMD had in previous stock news, announced revenue of $5.9bn for the first quarter of 2022 – 71% up on the same period last year. The company has predicted a 60% increase in full-year revenue while Intel on Thursday, dropped its forecast for full-year earnings per share $3.60. to $2.30.
Intel’s CEO Pat Gelsinger, who was appointed last year to lead the company out of turmoil, said in an interview with CNBC on Friday that the company’s strategy of coming back is like climbing Mount Kilimanjaro.
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On Tuesday, AMD announced $6.6 billion gross margin of 46%, for the second quarter of 2022, operating income of $526 million, operating margin of 8%, net income of $447 million and diluted earnings per share of $0.27 on GAAP.
“We delivered our eighth straight quarter of record revenue based on our strong execution and expanded product portfolio,” said AMD Chair and CEO Dr. Lisa Su. “Each of our segments grew significantly year-over-year, led by higher sales of our data center and embedded products. We see continued growth in the back half of the year highlighted by our next generation 5nm product shipments and supported by our diversified business model.”