Zhitong Financial APP has learned that demand for chips remains strong despite the economic damage caused by the pandemic of health events. So far this year, the semiconductor sector has outperformed the market.

Chipmaker AMD (AMD.US) has accelerated its pace and made remarkable profits in 2020, thanks to growing demand for graphics cards, computer processors and server chips.

Meanwhile, Micron Technology Inc (MU.US) has struggled with uncertainty in the memory industry, disappointing investors. Before the health pandemic, the memory industry was in trouble because of oversupply.

The new chip is expected to help AMD grab market share

To curb the spread of the health pandemic, people stay at home to buy computers and game hardware so that they can telecommute while maintaining entertainment. With increased consumption of video content, online games and videoconferencing as a result of "local refuge" and blockade policies, data center operators are busy expanding their networks to support a surge in data traffic.

The above situation boosted AMD's financial performance. The company said in April that it expected revenue growth of between 20% and 30% this year.

AMD seems to be capable of achieving his goal. With OEM expected to launch 100 new models based on AMD's latest Ryzen 4000 chip, AMD is likely to dominate the notebook market this year.

AMD accounted for 16.2 per cent of the laptop processor market in the fourth quarter of 2019, up 4 per cent from a year earlier, according to Mercury Research. It is reported that AMD accounted for 20 per cent of the laptop market in the first quarter of 2020.

The global notebook market is expected to grow by 1 per cent a year by 2024, according to TechNavio. While this may not seem very attractive, AMD can grab more market share from Intel Corp (INTC.US) (which AMD has succeeded in doing so far).

In addition, AMD will introduce a new generation of Ryzen processors later this year, which is expected to be 20 per cent faster than existing processors. Coupled with the catalysis of gaming, console and server business, it should not be difficult for AMD to reach the top this year.

Two factors promote Micron Technology Inc to make a comeback.

Micron Technology Inc released its Q3 results for fiscal 2020 last month, dispelling concerns about the impact of health incidents on his business. The company expects revenue to grow 23% this quarter, up from 14% year-on-year growth in the previous quarter.

Rising memory demand and improved prices have helped Micron Technology Inc make a comeback. It is reported that shipments of dynamic random access memory (DRAM) have increased by 10% in a row, and its ASP is growing at an intermediate single-digit rate. NAND Flash shipments grew in low units quarter-on-quarter, while ASP grew in high units.

Due to the emergence of catalysts such as data centers, smartphones and game consoles, memory chips will continue to sell well. At the same time, investors need to keep a close eye on the supply side.

The price of the 8GB DDR4 DRAM was $3.31 in June, the same as in May, according to DRAMeXchange. Micron Technology Inc's price continued to rise from December to May in 2019, which means that the upward momentum may have stopped.

In addition, DRAM spot prices have fallen by 17% in the past three months and are expected to continue their downward trend this quarter.

It is reported that server and PC DRAM prices may lose momentum as buyers delay purchases in anticipation of falling prices. Despite Micron Technology Inc's excellent quarterly report and guidance last month, the uncertainty surrounding memory prices may have played a damaging role.

Conclusion

AMD has been doing well thanks to the growth in market share, while it took Meguiar a year to regain its foothold. This also explains why AMD's stock market returns were much higher than Micron's in 2020.

AMD's extraordinary performance has made its share price expensive and is now trading at 165 times earnings. Micron Technology Inc, on the other hand, trades at 25 times earnings. However, if the price of memory loses power, the cheaper Micron Technology Inc may not be a cautious choice.