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Are AMD's ABCs Worth the Price Tag? PART 12 OF 17

In the preceding part of this series, we discussed how Advanced Micro Devices (AMD) Pascal GPU (graphics processing unit) pushed the companys Computing and Graphics revenue to a two-year high in fiscal 4Q16. The company is now expanding the GPU market beyond gaming and into thedata center.

With the advent of deep learning and AI (artificial intelligence), more and more cloud companies are using accelerators like GPU and FPGAs (field programmable gate arrays) for their deep learning work.

Nvidia (NVDA) is a leader in the AI market. Its revenue from data center rose 23% sequentially and 205% on a YoY (year-over-year) basis in the quarter ended January 2017. Meanwhile, Intels (INTC) data center revenue rose 4.4% sequentially and 8% on a YoY basis during the same quarter. This shows that the trend is moving away from x86 CPUs (central processing unit) to GPUs.

Until now, AMD only supplied x86 server chips to data centers. Now, its expanding its offerings to include Radeon Instinct, which is a combination of its GPU, CPU, and open source software. AMD has already secured orders from Google (GOOG) and Alibaba (BABA) to supply GPUs for their data centers.

AMD is developing next-generation Vega GPU and Zen-based server CPU Naples to expand the breadth of its customers beyond traditional and cloud servers to include embedded infrastructure and communications markets. With Naples, AMD is targeting cloud, big data applications, and traditional enterprise that require more threads, higher memory, and I/O-bound (input/output) applications.

To be sure, AMD is focusing more on thecloud as design wins convert into revenue faster than networking and storage.

Radeon Instinct and Naples CPU are expected to hit the market by the end of fiscal 2Q17. AMD stated that it is receiving astrong response from customers for its new products. As the design wins take some time to reflect in earnings, the effect of this would likely be visible in fiscal 4Q17.

In the meantime, AMDs Enterprise, Embedded, and Semi-Custom segment will continue to be influenced by the semi-custom seasonality.Continue to the next part for a closer look.

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Behind AMD's Big Plan for Data Center - Market Realist