Advanced Micro Devices (NASDAQ:AMD) keeps posting good news, which is driving fundamentals higher. After announcing 7nm at Computex, the company issued more positive developments that sent the stock above $30. Valuations mean very little now for AMD stock, setting a stage for $35 next.
On June 3, AMD said it would supply Radeon graphics chip solutions for Samsung’s SoCs and mobile applications. AMD already counts on the PC, notebook, console for Microsoft (NASDAQ:MSFT) Xbox and Sony (NYSE:SNE) PlayStation, cloud and HPC market using Radeon chips. With Samsung on board, AMD’s addressable market for GPUs expands again.
AMD will license custom graphics IP on RDNA graphics architecture to Samsung. Samsung will, in turn, use the IP primarily for mobile devices like smartphones. The deal should increase AMD’s cash flow and raise its profit margins with little risk to the company. The size of royalties from the deal is not easy to predict at this time. High-end smartphone sales are slowing. Still, advancements in mobile technology may lift device demand in the quarters ahead.
Your Takeaway
AMD’s valuations are already around twice that of Nvidia (NASDAQ:NVDA) stock and could expand. Markets are optimistic the deal will lift revenue and profits in the near-term. AMD no longer has to rely on PC GPU sales to grow sales.
