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The Bull Run on AMD Stock Is Not Anywhere Near Over

Tom Taulli

Tech stocks usually do not get a second chance. Once there is a major breakdown, it is extremely tough to regain a competitive edge. Just look at companies like Nokia (NYSE:NOK), BlackBerry (NYSE:BB) and Groupon (NASDAQ:GRPN).  Yes, things can get brutal. But as for Advanced Micro Devices (NASDAQ:AMD), the company has been able to beat the odds. During the past few years, AMD stock has staged an impressive turnaround.

Bull and bear case for AMD stock

Source: Shutterstock

In fact, Advanced Micro Devices is an example of a company that has had several second chances! Keep in mind that it has been around since 1969. Through its history, it has been able to get traction against arch-rival Intel (NASDAQ:INTC) from time to time, but the gains would not last long.  AMD simply did not have the global scale to keep up the momentum.

Things are different now. For the most part, AMD is a transformed company. It has become more disciplined with its cost-cutting. There has also been the outsourcing of chip production. More important, the company has become obsessed with innovation.

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A Closer Look at AMD Stock

This recent turnaround has been due to the strong leadership of CEO Lisa Lu. She has a rare blend of talents for both business and technology.

For example, she has written 40 technical papers and has a doctorate degree in electrical engineering from MIT. She has also held executive-level positions at companies like Freescale Semiconductor (NYSE:FSL) and IBM (NYSE:IBM).

When it comes to AMD stock, it’s important to understand that the technology platform is fairly unique. That is, the company develops both CPUs (Central Processing Units) and GPUs (Graphics Processing Units).

Both technologies have been around for quite some time, but their uses have undergone significant changes resulting in an expanded market opportunity. With CPUs, there is the growth in the data center market while GPUs have proven to be ideal for AI (Artificial Intelligence) and analytics.

Granted, INTC remains a formidable competitor, and Nvidia (NASDAQ:NVDA) has a powerful position with GPUs. Yet the market opportunities for these technologies is large enough for multiple players.

AMD is starting to get separation because of its focus on innovation.  For example, the company has put together a solid 7nm product, which should lead to market share gains. As for GPUs, there continues to be validation, as seen with a recent licensing of its Radeon graphics technology to Samsung (this will be for the massive mobile segment).

Another major validation for AMD is a deal with Cray (NASDAQ:CRAY), which is in the process of being acquired by Hewlett Packard (NYSE:HPE). Cray will use AMD CPUs and GPUs for the development of the Frontier supercomputer that will launch in 2021. It is expected to be the world’s fastest computer.

Bottom Line on AMD Stock

No doubt, AMD stock does face some notable challenges and headwinds. The U.S.-China trade war is disrupting supply chains in the chip market and weighing on global growth. At the same time, AMD still has limited resources and must deal with managing the complexities of targeting multiple markets.

But so far, Su has shown she knows how to focus on the right things and get results.

Granted, when it comes to AMD stock, the gains may not be on par of what we’ve seen in the past few years. But then again, for investors looking to get exposure to key markets like the data center and AI, this company does look like a solid option.

Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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