Advanced Micro Devices (AMD) shares got a boost earlier this year from investor enthusiasm for its processors for artificial intelligence. But AMD stock lately has been a laggard. With the pullback in the chipmaker’s shares, some investors may be wondering: Is AMD stock a buy right now?
↑
X
AMD Executive Touts These AI Chip Advantages As Battle With Nvidia Heats Up
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 AI data centers.
Analysts say AMD could benefit from Intel’s recent woes. Intel stock has plummeted this year on competitive and operational concerns.
Chief Executive Lisa Su Making A Difference
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).
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 3-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.
AMD now is focused on making chips for artificial intelligence applications, a market where Nvidia leads. Analysts say AMD benefits from providing customers with an alternative to Nvidia.
Data Center-Related 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.
In May 2022, AMD completed its $1.9 billion acquisition of distributed computing startup Pensando Systems. AMD said the deal will enhance its data center capabilities.
On Aug. 12, AMD completed its acquisition of Silo AI, the largest private artificial intelligence lab in Europe, for $665 million. Silo AI has developed tailored AI models, platforms and solutions for leading enterprises spanning cloud, embedded and endpoint computing markets.
On Aug. 19, AMD announced plans to buy computer hardware design firm ZT Systems for $4.9 billion in a move to better compete with AI systems leader Nvidia. Further, AMD intends to sell ZT’s manufacturing business and keep its systems design business. AMD stock jumped 4.5% on the news.
AMD Taking Market Share From Intel
In the second quarter, AMD took market share from Intel in CPUs for PCs as well as servers, according to Mercury Research.
AMD’s unit share of PC processor sales was 21.1% in the second quarter, up from 17.3% in the year-earlier period. Its desktop PC processor market share was 23%, vs. 19.4% in the same quarter last year. Its notebook PC processor share was 20.3% in Q2, vs. 16.5% in the year-ago quarter.
AMD’s unit share of the server CPU market rose to 24.1% in the second quarter from 18.6% in the year-earlier period.
Intel’s Myriad Problems
Advanced Micro Devices stands to gain more ground thanks to Intel’s latest misfortunes.
On Aug. 1, Intel badly missed estimates for the second quarter and with its guidance for the third quarter. The chipmaker also announced a $10 billion cost-reduction plan that includes 15,000 job cuts, or about 15% of its workforce. Plus, Intel suspended its quarterly dividend.
On Sept. 16, Intel announced more moves in its turnaround plan. Intel is pausing plans to build manufacturing plants in Poland and Germany by about two years. The company also intends to reduce or exit about two-thirds of its real estate holdings by the end of the year.
In addition, Intel is establishing an independent subsidiary for its foundry business. That could lead to Intel eventually spinning off or selling its chip manufacturing business.
Advanced Micro Devices News: AI Chips
On Dec. 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 stock dropped 1.3% on the day of its “Advancing AI” event. But the next day, Dec. 7, shares rocketed nearly 10%.
However, Nvidia leapfrogged AMD with its latest AI processors, which it announced on March 18. Those processors, the Blackwell series GPUs, will be available in late 2024. AMD stock retreated on the news.
But AMD stock popped higher 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 running Nvidia chips.
On June 2 at the Computex trade show, Su announced that AMD is moving to an annual cadence for its Instinct AI accelerators. After the current MI300, it will deliver the MI325X later this year, MI350 in 2025 and MI400 in 2026.
At Computex, Su also updated the company’s processor roadmap for notebook and desktop PCs. That includes the nascent category of high-end personal computers called AI PCs.
On Oct. 10, AMD held its latest “Advancing AI” event. The chipmaker discussed its AMD Instinct MI325X AI accelerators and next-generation networking solutions. It also launched its fifth-generation Epyc server central processing units and Ryzen AI Pro 300 Series PC processors.
AMD Fundamental Analysis
Late on July 30, AMD beat analyst estimates for the second quarter thanks to record sales of processors for data centers. It also forecast sales above views for the current quarter. AMD stock rose 4.4% the following day on the news.
Advanced Micro Devices earned an adjusted 69 cents a share on sales of $5.84 billion in the June quarter. Analysts polled by FactSet had expected AMD earnings of 68 cents a share on sales of $5.72 billion. On a year-over-year basis, AMD earnings increased 19% while sales advanced 9%.
Data center revenue jumped 115% year over year to $2.83 billion. A steep ramp in shipments of AMD Instinct graphics processors for AI applications drove the sales increase, the company said. It also noted strong growth in 4th Gen AMD Epyc server processors.
AMD’s client segment posted sales of $1.49 billion, up 49% year over year, driven by sales of AMD Ryzen PC processors. Meanwhile, sales declined in AMD’s gaming and embedded processor segments.
For the current quarter, AMD forecast sales of $6.7 billion, up 16%, based on the midpoint of its outlook. Wall Street was modeling $6.61 billion in third-quarter sales.
The next catalyst for AMD stock could be the company’s Q3 results, due out Oct. 29.
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.
On March 8, AMD stock notched a record high of 227.30 in intraday trades. But it fell over the next two months, bottoming at 141.16 on May 2, before trending higher.
However, during a tech stock sell-off this summer, it hit a low for the year of 121.83 on Aug. 5.
Advanced Micro Devices shares ended the regular trading session on Sept. 27 at 164.35.
AMD stock has an IBD Relative Strength Rating of 57 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 83 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?
No, AMD stock is not a buy right now.
AMD will need to form a new base in the right market conditions before setting another potential buy point. Check out IBD’s Big Picture column for the current market direction.
The IBD Stock Checkup tool ranks AMD stock as No. 11 out of 39 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 8 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, MarketSurge and SwingTrader platforms.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MAY ALSO LIKE:
Is Apple Stock A Buy Right Now?
Is Netflix Stock A Buy Right Now?
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
