Advanced Micro Devices (AMD) stock surged to an all-time high in late 2021 on robust PC sales. But with a pullback in the chipmaker’s shares, some investors may be wondering: Is AMD stock a buy right now?
AMD staged an amazing turnaround after bottoming in 2015, fueled by new products and improved profitability. And AMD stock rocketed over the next six years.
AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivals Nvidia (NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.
Founded in May 1969, AMD went public in September 1972. AMD shifted to a fabless semiconductor business in March 2009 by spinning off its factories as GlobalFoundries (GFS).
Chief Executive Lisa Su Making A Difference
Current Chief Executive Lisa Su took the reins in October 2014. She shepherded the Santa Clara, Calif.-based company into a new era with its Ryzen PC processors and Epyc server chips in 2017.
Under her supervision, AMD jumped ahead of Intel in making CPUs at smaller node sizes, giving its products an edge in speed and performance. AMD is now making chips at 5-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
Chip foundry Taiwan Semiconductor Manufacturing (TSM) produces AMD’s chips.
The situation has helped AMD take market share from Intel in PCs and servers. Those gains have buoyed AMD stock.
Data Center Acquisitions
Su also has overseen several big acquisitions. In February 2022, AMD completed its acquisition of Xilinx in an all-stock deal worth $49 billion. AMD is expanding its presence in the data center market with specialty chips from Xilinx. AMD stock rose on the acquisition news.
Also, on May 26, AMD completed its $1.9 billion acquisition of distributed computing startup Pensando Systems. AMD says the deal will bolster its data center capabilities. AMD stock popped 6.6% that day.
On June 9, AMD touted its growing opportunities during an analyst day presentation. The company said its total addressable market is now $300 billion, vs. $79 billion at its 2020 analyst day.
AMD predicted improving profit margins and free cash flow as well as compound annual sales growth of 20% for the next three to four years.
Intel Losing Market Share To AMD
In the fourth quarter, AMD took market share from Intel in CPUs for servers and desktop PCs, according to Mercury Research.
AMD’s unit share of the lucrative server CPU market rose to 17.6% in the fourth quarter, up from 10.7% in the year-earlier period.
AMD’s share of desktop PC processor sales was 18.6% in the December quarter, vs. 16.2% in the same quarter a year earlier.
However, AMD’s share of notebook PC processor sales was 16.4% in the fourth quarter, down from 21.6% a year earlier.
Advanced Micro Devices News: New CPUs
At the CES 2023 trade show on Jan. 4, AMD introduced new processors spanning notebook computers, desktop PCs and artificial intelligence data centers. It previewed the AMD Instinct MI300, the first data center chip to combine a CPU and a GPU for better performance and energy efficiency. However, AMD stock dropped 3.6% in the first trading session after the news.
On Nov. 10, AMD announced its fourth-generation Epyc server processors. AMD said its new server processors offer up to 2.8 times more performance and use up to 54% less power compared with the competition. AMD stock jumped on the news.
On Aug. 29, AMD introduced its Ryzen 7000 Series desktop processors, the first 5-nanometer processors for PCs. The new high-end processors are targeted at gamers, content creators and other users who crave higher performance. But AMD stock fell 1.8% after the product launch event.
AMD Fundamental Analysis
Late on Jan. 31, AMD delivered a mixed fourth-quarter report. It posted better-than-expected results for the December quarter but gave soft sales guidance for the current quarter, citing a continued weak PC market. AMD stock jumped 12.6% after the report, which highlighted strong data center chip sales.
AMD earned an adjusted 69 cents a share on sales of $5.6 billion in the December quarter. Analysts polled by FactSet had expected AMD earnings of 67 cents a share on sales of $5.51 billion.
On a year-over-year basis, AMD earnings fell 25% while sales rose 16%. The acquisition of Xilinx boosted revenue and helped offset declining PC and gaming chip sales.
For the current quarter, AMD predicted sales of $5.3 billion, down 10% year over year. Analysts were looking for $5.5 billion in the first quarter.
AMD Stock Technical Analysis
AMD stock sank to a nearly four-decade low of 1.61 a share in July 2015 before starting its epic recovery. It hit a record high of 164.46 in December 2021 before retreating. AMD stock ended the regular session Feb. 10 at 81.48.
AMD stock has a subpar IBD Relative Strength Rating of 29 out of 99. The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
AMD stock carries an IBD Composite Rating of 70 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 Buy Right Now?
AMD stock is not a buy right now. It needs to form a new base in the right market conditions before setting a potential buy point. Check out IBD’s Big Picture column for the current market direction.
In a positive sign, AMD stock is trading above its 50-day moving average line and its 200-day line.
The IBD Stock Checkup tool ranks AMD as No. 11 among 34 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 64 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 Stock Lists as well as IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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