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AMD EPYC Processors to Boost Google Cloud's Confidential VMs

Advanced Micro Devices, Inc. AMD recently announced that Alphabet’s GOOGL Google Cloud division is expanding its use of second-gen EPYC processors to provide enhanced security features to customers.

Google Cloud’s latest Confidential Virtual Machines (“VMs”{) will leverage second-gen EPYC processors’ Secure Encrypted Virtualization feature to help customers encrypt sensitive data not only when it is at rest, but also while it is being processed.

Moreover, since no code changes are required customers can transition to Confidential VMs in a seamless manner, while getting the same level of performance as Google’s existing N2D VMs that are also powered by second-gen EPYC processors.

Confidential VMs are available to all Google Cloud Platform (GCP) customers in several GCP regions that include europe-west1, asia-southeast1, us-central1 and europe-west4. The VMs are also available for Google Compute Engine in Beta.

The adoption of EPYC processors for Confidential VMs bodes well for AMD as it highlights the strong security capabilities of its processors. Moreover, growing momentum of second-gen EPYC processors is expected to boost AMD’s revenues in the upcoming days and instill investors’ optimism in the company’s stock.

Notably, shares of AMD have returned 19.3% in the year-to-date period compared with the industry’s rise of 3.3%.

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

Strong Traction for EPYC Processors Bode Well

AMD is witnessing robust adoption of its second-gen EPYC processors. Recently, Amazon AMZN adopted AMD EPYC processors to power the latest Elastic Compute Cloud (EC2) C5a instances of Amazon Web Services (AWS).

Hewlett Packard Enterprises selected second-gen EPYC processors to power its SimpliVity 325 Gen 10 HCI solution. The solution doubles the number of cloud-based virtual desktops supported per server from 300 to 600, which provides organizations with a 50% lower cost per remote worker.

Microsoft’s MSFT cloud computing platform — Azure — also selected AMD’s second-gen EPYC processors to power its Azure NVv4 virtual machines (VMs). This will enable Azure to provide customers with a cloud-based virtual desktop capable of handling HPC workloads.

These major deal wins indicate a positive trend for AMD’s latest processors and are expected to drive the company’s top line in the quarters ahead. The momentum is likely to continue, driven by rapid growth in the cloud computing market at a CAGR of 14.9% between 2020 and 2027, per Grand View Research data.

Moreover, the coronavirus-induced work-from-home wave and increased use of online schooling solutions are driving demand for cloud computing solutions. These are favoring prospects of AMD, which currently carries a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Persistent Risks

AMD is likely to be negatively impacted by COVID-19 induced supply-chain constraints and broader macroeconomic weakness prevailing in the market.

Also, increasing expenses on product development are expected to limit margin expansion. Further, stiff competition from Intel is likely to lead to pricing pressure and dampen profitability in the near term.

In February, Intel announced the extension of its Software Guard Extensions (SGX) security feature to Xeon server processors. The company also unveiled other security enhancements like container and VM isolation as well as full memory encryption for its processors.

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