Kerrisdale Capital Investment has knocked out a report which makes grim reading for AMD.
The report said that after three years of awful performance AMD is transitioning away from PC to "growth markets", aggressively marketing its reorganisation narrative to justify a disproportionate valuation.
AMD is a typical example of a legacy company, which still benefits from its past reputation as a technological leader to fuel misconceptions about its survival prospects.
"Although it plays a systemically crucial role to avoid the complete monopoly of Intel Corporation in certain markets, it is not a sufficient argument to out rule the option of bankruptcy," the report said.
Many investors are buying into the turnaround story advanced by its recently appointed CEO, Lisa Su, and we do not dispute that AMD still retains some healthy business units.
But there report concludes that AMD, which once reached a valuation of $6.8bn in 2010, is destined to go bankrupt by 2020.
It notes that the ongoing corporate refresh cycle has boosted many companies' revenues but not really AMD's, as it is too dependent on the volatile consumer PC segment.
Since AMD spun off its manufacturing business into GlobalFoundries in 2009 and as
GlobalFoundries expands its client base, AMD is losing its ability to enjoy any preferential treatment with only two pure, foundry-model players remaining
The report said that AMD is engaged in a relentless diversification drive, pursuing "growth markets" without being able to create a stronghold in a specific one – apart from the semi-custom business in gaming.
Yet AMD's ability to capitalize it is grossly overestimated. Last quarter AMD hinted at virtual reality as a potential growth channel yet commercial applications of this technology are still years away from materializing. Even if it were, it is very unlikely that this could constitute a promising outlet for its GPU and CPU based semicustom business, the report said.
"We agree that these may be potential future growth avenues but these are extremely long shots, more suitable for companies with deep pockets, such Samsung Intel - certainly not for an ailing chipmaker. The semi-custom business is more promising but even here, AMD chose the wrong path," the report said.