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?
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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.
AMD now is focused on making chips for artificial intelligence applications, a market where Nvidia leads.
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. AMD stock rose on the acquisition news.
Also, 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. AMD stock popped 6.6% that day.
In June 2022, 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.
AMD Taking Market Share From Intel
In the third quarter, AMD took market share from Intel in CPUs for PCs as well as servers, according to Mercury Research.
AMD’s share of desktop PC processor sales was 19.2% in the third quarter, up from 13.9% in the year-earlier period. Its share of notebook PC processor sales was 19.5%, vs. 15.7% in the same quarter last year.
AMD’s unit share of the lucrative server CPU market rose to 23.3% in the third quarter from 17.5% in the year-earlier period.
Advanced Micro Devices News: AI Chips
At CES 2024 on Jan. 8, AMD introduced new desktop processors for the nascent category of high-end personal computers called AI PCs. A month earlier, it unveiled mobile processors for notebook AI PCs.
On Dec. 6, AMD launched its Instinct MI300 accelerators and processors for data centers. Those systems for high-performance computing and AI applications will 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%.
On Oct. 10, AMD announced a deal to buy Nod.ai to expand the company’s open AI software capabilities. AMD said the acquisition will help in the development of AI processors and accelerators.
AMD Fundamental Analysis
Late on Oct. 31, AMD beat Wall Street’s targets for the third quarter but missed with its outlook for the current period. However, AMD also forecast higher-than-expected sales of its new artificial intelligence chips for data centers. That news lifted AMD stock 9.7% in the next trading session.
AMD earned an adjusted 70 cents a share on sales of $5.8 billion in the September quarter. Analysts polled by FactSet had expected AMD earnings of 68 cents a share on sales of $5.7 billion. On a year-over-year basis, AMD sales and earnings both rose 4%.
For the fourth quarter, AMD expects to generate sales of $6.1 billion, up 9% from the same period last year. However, analysts were looking for Q4 sales of $6.39 billion.
AMD tempered its soft Q4 outlook with a prediction of robust sales for its MI300 AI accelerators. The company expects to exceed $2 billion in sales of the new product in 2024. It also forecast $400 million in sales in the fourth quarter as production ramps.
The next catalyst for AMD stock likely will be its Q4 earnings report, due on Jan. 30.
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’s high point coincided with a peak in PC sales during the Covid pandemic.
On Nov. 22, AMD stock broke out of a cup-with-handle base at a buy point of 122.11, according to IBD MarketSmith charts. Shares climbed as high as 151.05 on Dec. 29 but dropped in a broad sell-off of tech stocks in the next trading session. But shares soon rebounded.
Advanced Micro Devices shares ended the regular trading session Jan. 16 at 158.74.
AMD stock has an IBD Relative Strength Rating of 97 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 97 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. It is extended beyond the 5% chase zone of its breakout, based on IBD trading principles.
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.
In a positive sign, AMD stock is trading well above its 50-day moving average line. Also, its relative strength line is rising as it outperforms the S&P 500 index.
The IBD Stock Checkup tool ranks AMD as third among 38 stocks in IBD’s fabless semiconductor industry group. The fabless chipmaker group ranks No. 22 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 X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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