Advanced micro devices (AMD) shares soared to a record high in early March on investor enthusiasm for its artificial intelligence processors. But its shares fell ahead of the introduction of new AI chips from rival Nvidia (NVDA). With the chipmaker’s stock in decline, some investors may be wondering: Is AMD stock a bargain right now?
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AMD executive touts these AI chip advances as battle with Nvidia heats up
AMD staged a stunning turnaround from its 2015 low, fueled by new products and improved profitability. And AMD shares soared for the next six years. But they fell starting in late 2021 amid a cyclical decline in PC sales. But AMD shares rallied again last year amid excitement about its AI chips for data centers. It also likely stands to benefit from a PC upgrade cycle fueled by AI PCs.
AMD competes with Intel (INTC) in the manufacture of central processing units, or CPUs, for personal computers and servers. It also competes with Nvidia in the market for graphics processing units, or GPUs, for PCs, game consoles, and data centers.
AMD was founded in May 1969 and went public in September 1972. AMD transitioned to a fabless semiconductor company in March 2009 by spinning off its manufacturing facilities as GlobalFoundries (GFS system).
Chief Executive Officer Lisa Su Makes the Difference
Current CEO Lisa Su took over in October 2014. In 2017, she led the Santa Clara, California-based company into a new era with its Ryzen PC processors and Epyc server chips.
Under her watch, AMD leapfrogged Intel in making CPUs with smaller node sizes, giving its products a head start in speed and performance. AMD is now making chips at the 4-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
Chip foundry Taiwanese semiconductor production (TSM) produces AMD’s chips.
The situation has helped AMD take market share from Intel in PCs and servers, and those gains have boosted AMD stock.
AMD is now focusing on making chips for artificial intelligence applications, a market where Nvidia has the lead. Analysts say AMD has a vested interest in offering customers an alternative to Nvidia.
Data center related acquisitions
Su has also overseen several major acquisitions. In February 2022, AMD completed its acquisition of Xilinx in an all-stock deal valued at $49 billion. AMD is expanding its presence in the data center market with specialty chips from Xilinx.
Also in May 2022, AMD completed the acquisition of distributed computing startup Pensando Systems for $1.9 billion. AMD said the deal will enhance its data center capabilities.
On July 10, AMD announced a deal to acquire Silo AI, the largest privately held artificial intelligence lab in Europe, for $665 million. Silo AI has developed custom AI models, platforms and solutions for leading enterprises in the cloud, embedded and endpoint computing markets. AMD shares rose 3.9% on the news.
AMD Takes Over Market Share From Intel
According to Mercury Research, AMD took market share from Intel in PC and server CPUs in the first quarter.
AMD’s unit share of PC processor sales was 20.6% in the first quarter, up from 17% in the year-ago period. Desktop PC processor market share was 23.9%, up from 19.2% in the year-ago quarter. Notebook PC processor share was 19.3% in Q1, up from 16.2% in the year-ago quarter.
AMD’s market share in the lucrative server CPU market rose to 23.6% in the first quarter, up from 18% a year earlier.
News from Advanced Micro Devices: AI Chips
On December 6, AMD launched its Instinct MI300 accelerators and processors for data centers. Those systems for high-performance computing and AI applications compete with Nvidia’s H100-series devices. AMD shares fell 1.3% on the day of the “Advancing AI” event. But the next day, December 7, shares rose nearly 10%.
Nvidia, however, has caught up to AMD with its latest AI processors, which the company announced on March 18. Those processors, the Blackwell series GPUs, will be available in late 2024. AMD shares fell on the news.
But AMD shares rose on May 17 on a report that Microsoft (MSFT) plans to offer its Azure cloud computing customers a platform of AMD artificial intelligence chips as an alternative to systems with Nvidia chips.
On June 2, Su announced at Computex that AMD will be moving to an annual cadence for its Instinct AI accelerators. Following the current MI300, it will ship the MI325X later this year, the MI350 in 2025, and the MI400 in 2026.
At Computex, Su also updated the company’s processor roadmap for notebooks and desktop PCs, which includes the emerging category of high-end personal computers called AI PCs.
AMD Fundamental Analysis
At the end of April 30, AMD matched Wall Street’s first-quarter profit target, but sales were a bit soft. Sales guidance for the current quarter was also roughly in line with estimates. AMD shares fell 8.9% in the next trading session.
Advanced Micro Devices earned an adjusted 62 cents a share on revenue of $5.47 billion in the March quarter. Analysts polled by FactSet had expected earnings of 62 cents a share on revenue of $5.48 billion. On a year-over-year basis, AMD’s profit rose 3%, while revenue rose 2%.
For the current quarter, AMD forecast revenue of $5.7 billion, plus or minus $300 million. Analysts had expected revenue of $5.73 billion in Q2. In the same period last year, AMD generated revenue of $5.36 billion for the quarter.
The next catalyst for AMD stock could be the company’s Q2 earnings report, which is expected Tuesday. Wall Street is forecasting AMD earnings of 68 cents per share, up 17% year over year, on sales of $5.72 billion, up 7%, in the June quarter.
Technical Analysis of AMD Stock
AMD shares fell to a nearly four-decade low of $1.61 per share in July 2015 before beginning an epic recovery. In December 2021, it hit a then-record high of $164.46 on strong PC sales during the Covid pandemic.
AMD shares hit a new record high of 227.30 in intraday trading on March 8. But they fell over the next four weeks, falling below their 50-day moving average line. They rose above that key level in late June but fell back below it on July 17 amid a broad selloff in tech stocks.
Shares of Advanced Micro Devices closed the regular trading session on July 26 at 139.99.
AMD stock has an IBD Relative Strength Rating of 46 out of 99. The Relative Strength Rating shows how a stock’s price performance compares to all other stocks over the past 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
AMD stock has an IBD Composite Rating of 65 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Is AMD Stock a Bargain Right Now?
No, AMD stock is not worth buying at this time.
AMD will need to establish a new base in the right market conditions before another potential buy point is identified. Check out IBD’s Big Picture column for current market direction.
The IBD Stock Checkup tool ranks AMD stock No. 12 out of 39 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 14 out of 197 industry groups that IBD tracks. IBD trading guidelines recommend focusing on top-rated stocks in leading industry groups.
To find the best stocks to buy or watch, check out IBD’s stock lists and IBD’s Leaderboard, MarketSurge and SwingTrader platforms.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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