Advanced Micro Devices (AMD) stock is trading near record-high territory on expectations for continued market share gains in processors for PCs and servers. Some investors may be wondering: Is AMD stock a buy right now?
AMD has staged an amazing turnaround over the past five years, fueled by new products and improved profitability. And AMD stock has climbed as a result.
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 into a joint venture called GlobalFoundries.
Chief Executive 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 making chips at 7-nanometer scale, while Intel has struggled to make chips at 10-nanometer scale. AMD is now developing chips at 5-nanometer scale. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
This has helped AMD take market share from rival Intel in PCs and servers.
Su also is overseeing a potentially transformative acquisition. On Oct. 27, AMD announced an all-stock deal worth $35 billion to buy Xilinx (XLNX) to expand its growing data-center business. However, AMD stock fell on the Xilinx acquisition news. Critics said the acquisition complicates AMD’s “clean” investor story around market share gains in processors.
Intel Stumbles With Next-Generation Chips
On July 23, Intel announced a six-month delay in production of its already behind-schedule 7-nanometer processors. Intel now expects to ship its first 7-nanometer processors in late 2022 or early 2023. By that time, AMD could be making 3-nanometer processors, analysts said.
Chip foundry Taiwan Semiconductor Manufacturing (TSM) produces AMD’s chips.
Market analysis firm Mercury Research on Nov. 2 released data that showed AMD made steady gains in processors at the expense of Intel in the third quarter.
AMD’s unit share of notebook PC processor sales hit a record high of 20.2% in the September quarter. Its share was 14.7% in the year-earlier period, Mercury said.
AMD’s unit share of desktop PC processor sales was 20.1% in the third quarter, vs. 18% in the year-earlier period, Mercury said.
In addition, Mercury pegged AMD’s server processor market share at 6.6% in Q3, vs. 4.3% in the same quarter last year.
Advanced Micro Devices News: New PC, Gaming Chips
On Oct. 8, AMD introduced its next-generation Ryzen processors for desktop computers. It described its Ryzen 5000 series central processing units as the “fastest gaming CPUs in the world.”
The Ryzen 5000 series products are aimed at PC gamers and content creators. AMD touted major performance improvements for gaming, video editing, computer-aided design and software compiling with the new chips.
On Oct. 28, AMD showed off its latest graphics processors to compete with Nvidia. The AMD Radeon RX 6000 series graphics cards promise world-class 4K resolution performance for top game titles.
The next catalyst for AMD stock could be the virtual CES 2021 tech show. Chief Executive Su is scheduled to give a keynote speech during the online event on Jan. 12.
AMD Fundamental Analysis
On Oct. 27, AMD reported better-than-expected September-quarter results thanks to strong demand for PC, gaming and data center products. However, AMD stock fell on the news.
AMD earned an adjusted 41 cents a share on sales of $2.8 billion. Analysts had expected AMD earnings of 35 cents a share on sales of $2.56 billion. On a year-over-year basis, AMD earnings soared 128% while sales climbed 56%.
For the fourth quarter, AMD expects to generate sales of about $3 billion. Analysts were modeling $2.62 billion in sales for the December quarter. In the year-earlier quarter, AMD sales were $2.13 billion.
Analysts say AMD should benefit this holiday season from healthy sales of personal computers and game consoles.
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.
AMD stock has an IBD Relative Strength Rating of 86. That means it has outperformed 86% of stocks on the market over the past 12 months.
It also has an IBD Accumulation/Distribution Rating of B-, indicating modest institutional buying of AMD shares.
Is AMD Stock A Buy Right Now?
AMD stock is technically a buy right now.
It ended the regular session Dec. 23 at 91.55. That’s still within the buy zone of its breakout, which extends to 93.26.
AMD stock has an IBD Composite Rating of 98 out of a best-possible 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.
The IBD Stock Checkup tool ranks AMD as tied for second place in IBD’s fabless semiconductor group. The top-ranked stocks in the group are Inphi (IPHI) and Monolithic Power Systems (MPWR). However, Marvell Technology (MRVL) is in the processing of acquiring Inphi in a $10 billion deal.
The fabless chipmaker group ranks No. 64 out of 197 industry groups that IBD tracks. Growth stock investors should focus on leading stocks in the top 40 industry groups.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MAY ALSO LIKE: