Intel CPU Price Cut Bad News For AMD

Rumors that Intel (NASDAQ:INTC) could cut server process (CPU) prices are bad news for Advanced Micro Devices (NASDAQ:AMD). AMD enjoys sales momentum from its superior EPYC server. Even though technology customers want more performance on low energy usage, price-to-performance matters.

Intel’s price cut would drive demand for its server chips. It would also win back customers who bought AMD chips instead. AMD suffered from a server CPU shortage since the first quarter. By lowering prices and increasing supply, Intel will increase its revenue and profitability.

In the second quarter, AMD sustained a server market share of 9.5%. Intel could slow AMD’s growth momentum by becoming more competitive. Furthermore, Intel’s next-generation Eagle Stream server process would help increase sales. Slated for a Q1/2022 release, Intel built Eagle Stream on the 10-nanometer process technology.

Investors may wait a few months for Intel’s chip refresh to send the stock higher. The stock pays a dividend of $1.39 a share, whereas AMD offers none. AMD trades at half the market capitalization of that of Intel. At its size, Intel’s Mobileye unit offers further diversification in the autonomous driving space.

Bottom Line

AMD will probably trade at new highs in the next year. Intel, stuck in a trading range, is due for a strong rebound as its fundamentals improve.