If there were any lingering doubts that cloud server spending has jumped in March and April, AMD (AMD) and Samsung Electronics' earnings reports and calls should put them to rest.
AMD, whose Epyc server CPU business has been a key growth driver in recent quarters, reported that its server CPU unit shipments rose by a double-digit percentage sequentially and more than tripled annually. The company also forecast that Epyc sales would see strong sequential growth in Q2.
Though supercomputer deals and other high-performance computing (HPC) engagements are providing some lift as well, CEO Lisa Su noted that AMD saw "a very nice acceleration" in its server CPU sales to cloud giants (the proverbial hyperscalers) over the course of Q1, as clients added capacity to help support the usage spikes they've seen for various apps and services amid COVID-19 lockdowns. This acceleration helped drive strong CPU unit growth, albeit while pressuring average selling prices (ASPs).
Su also said that one major cloud client "was able to deploy 10,000 second-gen Epyc servers in less than 10 days to support the surge in demand for their collaboration services." There's a good chance that the client is either Microsoft (MSFT) or Alphabet/Google (GOOGL) , given the demand spikes that they've reported for their respective collaboration offerings.
Samsung, by far the world's biggest DRAM and NAND flash memory maker, reported that its memory sales rose 15% annually in Q1 to KRW13.14 trillion ($10.8 billion).
And -- in remarks that appear to have helped rival Micron's (MU) stock rise more than 9% on Wednesday -- Samsung forecast DRAM and NAND sales would remain strong in Q2, as strong demand from server memory clients and "steady" demand from PC clients offset weaker smartphone-related demand.
AMD and Samsung's comments arrive less than a week after Intel (INTC) reported that its server CPU division (the Data Center Group, or DCG) saw its sales to cloud service providers rise 53% annually in Q1. Intel also forecast that cloud demand would remain strong in Q2, and said it was optimistic that this strength would continue into Q3.
Others, such as Micron, Nvidia (NVDA) and SK Hynix, have also reported seeing strong cloud-related orders to varying degrees.
There is some risk that demand could soften in the back half of the year, particularly given that cloud capex has been fairly cyclical in recent years and was already on the upswing before COVID-19 lockdowns arrived.
The easing of lockdowns could lead the usage spikes recently seen for many apps and services to at least partly reverse, and the top-line pressures that some tech giants are seeing could also weigh on capex. It's worth noting here that Google, which is dealing with major ad sales pressures, said it expects "a moderate reduction" to its 2020 data center capex plans relative to the start of the year, albeit while still indicating that server spend would be up.
Also, prolonged macro pressures would probably weigh on traditional enterprise server demand, which in turn could offset higher cloud-related sales. Intel cautioned last week that it expects DCG's sales related to enterprise and government end-markets (up 34% in Q1) to soften in the second half of 2020.
Nonetheless, for now at least, COVID-19 lockdowns are proving to be a net positive for server chip demand, in large part due to the strain these lockdowns have placed on cloud data centers. And as Google and others have suggested, there's a good chance that a lot of the usage jumps that have been seen for both consumer and business apps/services won't entirely reverse once lockdowns end.
