Advanced Micro Devices (NYSE: AMD), the No. 2 microprocessor developer, has nowhere to go but up. Investors this year have sent its shares soaring nearly 50 percent.

At Wednesday's close, trading, AMD was at $7.97, down 3 cents, valuing the Sunnyvale, Calif., semiconductor designer at $5.6 billion.

That's tiny compared to Intel (Nasdaq: INTC), the No. 1 chipmaker, whose market capitalization is $140.2 billion and which controls roughly 90 percent of the global market for microprocessors, the chips inside PCs and computer servers that process all the electronic instructions.

Both companies essentially developed the microprocessor that pioneered the initial PC revolution and battled over patent rights for years before agreeing to settle and cross-license each other.

Manufacturers headed by Hewlett-Packard Co. (NYSE: HPQ), the biggest PC maker and Dell (Nasdaq: DELL), No. 3,  need AMD chips as second sources in case a problem crops up with Intel, as well as a lower-cost producer.

Under new CEO Rory Read, a former executive with China's Lenovo Group, AMD has taken steps to rebuild itself as a slimmer design house. Under prior management, it spun off its flash-memory business as Spansion (NYSE: CODE) and sold most of its manufacturing to Abu Dhabi's GlobalFoundries.

Going Fabless

As a result, AMD now is fabless, although it will has agreed to pay GlobalFoundries shares valued at $278 million and a sales commitment valued at $425 million. One-time charges for both will be recorded on the first-quarter balance sheet.

On continuing operations, though, analysts expect AMD will report net income to rise nearly 18 percent to 9.4 cents a share from last year's 8 cents, as revenue falls 3.5 percent to $1.56 billion from $1.63 billion.

Analysts expect further improvement this year because of new product introductions, higher growth and AMD's new freedom to order its designs executed by others, including Taiwan Semiconductor Manufacturing Corp. (NYSE: TSM).

In the past week, analyst Vijay Rakesh at Sterne Agee boosted his price target on AMD to $10 from $8, and Ambrish Srivastava boosted the price target to $7.50 from $5.

Indeed, 12 analysts polled by Zacks now rate the chip designer a strong buy, with one more as a buy and 11 as a hold. Two rate AMD underperform and one a sell.

Battling Intel On Low Power

Under Read, AMD has also taken steps to compete better against Intel. Last month, it closed the $334 million acquisition of SeaMicro, a private developer of low-power microprocessors whose technology will be integrated into its Opteron chips.  The acquisition is now AMD's Data Center Server Solutions unit.

Last quarter, AMD reported cash and investments of nearly $2 billion. Some analysts have speculated AMD might want to acquire MIPS Technologies (Nasdaq: MIPS), a designer which has hired Goldman Sachs (NYSE: GS) to advise on strategy.

AMD itself hired a new chief strategist, Rajan Naik, in January, from McKinsey & Co., an engineer who worked at Intel. Read has also hired new chiefs for marketing and technology and said the company wants to focus more on high-end computing and mobile platforms.