How Advanced Micro Devices, Inc. Stock Is Getting Its Mojo Back
Innovate or die. That’s basically the mantra for the technology sector. Without innovation, former highfliers become, well, fossils. And that’s just what happened to former semiconductor superstar Advanced Micro Devices, Inc. (NASDAQ:AMD). With rivals quickly becoming the preferred chipset for a variety of computing and mobile applications, AMD is a former shell of itself.
Or at least that was the case.
While it’s been not so quietly suffering, AMD has been innovating. And now those innovations are finally starting to bear some serious fruit. Already, Advanced Micro Devices stock has surged during 2017. But the best part is that the firm could see even more gains in the year ahead. For investors, AMD is no longer the dying fossil it once was.
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AMD Is Killing It in CPUs & GPUs
During the personal computer revolution and the go-go dotcom days, Advanced Micro Devices was always seen as second fiddle to Intel Corporation (NASDAQ:INTC).
Thanks to better chipsets, faster processors, and licensing deals, INTC became the dominate semiconductors found in PCs. This was a huge issue for AMD when the personal computing boom started to bust. One wrong chipset later, and the company was pretty much sunk. At one point, you could have snagged Advanced Micro Devices stock for less than $2 per share.
However, all that seems to be changing for the better.
Advanced Micro Devices has once again started to innovate in a big way. Building upon its successful ZEN launch in 2016, the company has fleshed out its core lineup of CPUs.
In the personal computing market, the semiconductor’s RYZEN chipset has become immensely popular with consumers thanks in part to its high performance for its lower price point. Moreover, its EPYC series has quickly taken market share in the vital server and cloud computing space.
These better-designed chipsets have lit a fire under Advanced Micro Devices’ sales and market share. During the last reported quarter, the firm managed to increase its market share by 2.1% year-over-year in the personal computing space, while seeing a 0.5% jump in servers.
And while it may be easy to laugh at that small jump in server growth, that number is actually a doubling of AMD’s previous total server market share.
But AMD isn’t just innovating on the CPU front. The firm has quickly become a graphics processing unit (GPU) powerhouse as well.
A lot of attention has been placed on the growth of GPUs and the mining of cryptocurrencies like bitcoin. And it’s true that mining has created a supply crunch that has left prices for GPUs skyrocketing.
However, that’s not really the focus. The need for advanced imaging for industries like healthcare, engineering and science has created an interesting tailwind for graphics chip manufacturers. This includes Advanced Micro Devices.
While Nvidia Corporation (NASDAQ:NVDA) dominates the market, AMD has quickly chipped away market share here as well. It’s VEGA lineup managed to make an impressive 6.5% quarter-over-quarter leap in market share. Today, AMD commands about 33% of the market.
Advanced Micro Devices Could See More Gains in 2018
For investors in long-suffering AMD, these market share jumps are great news and should be seen as major wins for the firm. But these gains aren’t the end of the road for Advanced Micro Devices stock. This is due to two words: embedded chips.
Embedded chipsets feature all-in-one design and are engineered for specific applications. As a result, they take less energy to run and have lower costs. They’ve become the go-to way many tech firms look to run smart watches, MP3 players and smartphones. According to data researcher Trefis, the market opportunity for embedded chips is more $15 billion.
Advanced Micro Devices is addressing this need with the launch of the EPYC Embedded 3000 and RYZEN Embedded V100 semiconductor sets.
What’s great is that the market for embedded processors is much more stable than that of the PC market. There tends to be less boom and bust with them. That’s great for AMD as that boom-and-bust cycle of PCs has long defined the firm and its stock price. Perhaps the best part is both Intel and NVDA have less control/market share in this area.
Now, some of the firms that compete here, like Texas Instruments Incorporated (NASDAQ: TXN), are powerhouse players. But for Advanced Micro Devices, the large market and demand for these chips provide plenty of opportunities to pick up revenues and additional earnings potential.
Bottom Line for Advanced Micro Devices Stock
With rising market share in its core markets and a smartly timed expansion effort into embedded chips, AMD seems to have gotten its mojo back. The firm managed to report it’s first full year profit in nearly five years based on its recent successes.
For investors, that’s huge news. Advanced Micro Devices stock has rallied hard over the last few quarters on the back of rising sales. But the gains could only be the start as these efforts continue to take hold.
That makes AMD stock an interesting buy in the tech sector.
There are some risks, but the overall news continues to be positive for Advanced Micro Devices and its newfound focus on innovation. And that could continue to lift shares higher in the new year.
Disclosure: None
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