Advanced Micro Devices (AMD) stock surged to an all-time high in early March on investor enthusiasm for its processors for artificial intelligence. But its shares fell ahead of the debut of new AI chips from rival Nvidia (NVDA). With the pullback in the chipmaker's shares, some investors may be wondering: Is AMD stock a buy right now?
X
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. But it slumped starting in late 2021 during a cyclical decline in PC sales. However, last year, AMD shares rose anew amid excitement over its AI chips for data centers.
AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivals Nvidia 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 4-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. 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 first 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 20.6% in the first quarter, up from 17% in the year-earlier period. Its desktop PC processor market share was 23.9%, vs. 19.2% in the same quarter last year. Its notebook PC processor share was 19.3% in Q1, vs. 16.2% in the year-ago quarter.
AMD's unit share of the lucrative server CPU market rose to 23.6% in the first quarter from 18% in the year-earlier period.
Advanced Micro Devices News: AI Chips
On April 16, AMD introduced a new series of processors for commercial mobile and desktop AI PCs. Those chips will be available in the second quarter.
At CES 2024 on Jan. 8, AMD announced 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 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 offerits Azure cloud computing customers a platform of AMD artificial intelligence chips as an alternative to systems running Nvidia chips.
AMD Fundamental Analysis
Late on April 30, AMD matched Wall Street's earnings target for the first quarter but its sales were a tad light. Also, its sales outlook for the current quarter was roughly in line with estimates. AMD stock fell 8.9% in the next trading session.
Advanced Micro Devices earned an adjusted 62 cents a share on sales of $5.47 billion in the March quarter. Analysts polled by FactSet had expected earnings of 62 cents a share on sales of $5.48 billion. On a year-over-year basis, AMD earnings rose 3% while sales climbed 2%.
For the current quarter, AMD predicted sales of $5.7 billion, plus or minus $300 million. Analysts had been looking for Q2 revenue of $5.73 billion. In the year-earlier period, AMD generated sales of $5.36 billion for that quarter.
The next catalyst for AMD stock could be its Q2 earnings report, due in late July or early August.
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. In December 2021, it hit a then-record high of 164.46 on strong PC sales during the Covid pandemic.
AMD stock notched a new all-time high of 227.30 in intraday trades on March 8. But it fell over the next four weeks, dropping below its 50-day moving average line.
Advanced Micro Devices shares ended the regular trading session on May 24 at 166.36.
AMD stock has an IBD Relative Strength Rating of 85 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 as No. 11 out of 39 stocks in IBD's fabless semiconductor industry group. The fabless chipmaker group ranks eighth 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
Join IBD Live For Stock Ideas Each Morning Before The Open
