According to a report by Bernstein on the U.S. semiconductors, particularly focusing on Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD), the PC market continues to improve following several quarters of channel inventory correction consequent of 2 years of pandemic-fueled demand pull-forward.
This normalization is evident from the 8% year-over-year decline in PC shipments in Q3, marking an improvement from Q2 and aligning closely with pre-pandemic levels. The alignment of CPU shipments with overall PC units in Q3 highlights a roughly normalized CPU channel.
According to Bernstein, AMD emerges as a noteworthy player in this evolving market. The company has seen a notable shift in its favor, particularly in the notebook segment, where it gained significant unit and revenue share in the quarter. This gain is underscored by AMD's improved average selling prices (ASPs) for notebook CPUs (up 23% quarter-over-quarter), which, although still trailing Intel, have narrowed the gap significantly. AMD Desktop ASPs fell ~1% quarter-over-quarter, ~15% below the COVID peak.
"Intel's notebooks ASPs grew sequentially, rising ~9% vs AMD's 23% growth, though remain at a double-digit premium to AMD's parts, and were ~7% below the COVID peak. Intel's desktop ASPs declined ~6% QoQ and sit ~9% below their COVID peaks, maintaining a comfortable premium to AMD's parts," mentioned the analysts.
According to the analysts, both Intel and AMD project a steady PC market, with expectations of continued client increases in Q4. Beyond client though AMD investors will be looking toward AI, as per Bernstein, which believes the company's MI300 trajectory and its upcoming event in December are set to further define its stance in the AI domain. AMD has also seen an uptick in its server CPU market share in Q3.
"Intel investors will remain focused on prospects for CPUs within a burgeoning AI world, the gross margin trajectory, cost cuts, hope for new server product ramps to stem the share losses next year, and how the foundry story plays out (or doesn't)," commented the analysts.
Intel's (Market Perform, Target Price $36) operational difficulties are now clearly visible in the market's eye. However, Bernstein suggests that the near-term fundamentals for Intel may have bottomed out at this point.
Bernstein observes that AMD (Market Perform, Target Price $100) is showing positive developments on the client side, alongside a notable recovery in the datacenter CPU's market share. Clarity is also emerging on AMD's 2024 AI ramp. Despite these advances, Bernstein noted that AMD is currently navigating through some challenges in the gaming and embedded, which are pressuring near-term numbers.