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Why Advanced Micro Devices Stock Gained 59% So Far in 2018

Anders Bylund, The Motley Fool

What happened

Shares of Advanced Micro Devices (NASDAQ: AMD) rose 45.8% in the first half of 2018, according to data from S&P Global Market Intelligence. After hitting a peak in June, the stock retreated a bit before bouncing higher in early July as well. All told, the microchip designer's shares have gained 59.1% year to date.

So what

The big story in early 2018 was cryptocurrency mining.

Crypto miners have been snapping up a ton of AMD's and NVIDIA's (NASDAQ: NVDA) fastest graphics cards in recent quarters because they happen to be the best mining tool available to most people. Custom chips can churn out even faster crypto-mining results in many cases, but they can be difficult to find and even harder to set up properly. Furthermore, some cryptocurrency communities are going out of their way to make their algorithms more manageable for graphics cards. So Nvidia and AMD surfed that wave in late 2017 and early 2018, even though crypto prices plunged back to earth after a sharp skyward spike in December.

The magnitude of the correction led to a negative return in April, but the stock roared back to life again when AMD's first-quarter report crushed Wall Street's financial targets. A plethora of analyst upgrades and target-price boosts followed, solidifying AMD's resurgence.

Technician using tweezers to hold up a semiconductor chip in front of his safety glasses and breathing mask.

Image source: Getty Images.

Now what

Cryptocurrency mining is no longer the leading theme in AMD's analyst reports. Instead, Wall Street's finest are focusing on AMD's solid Ryzen and EPYC brands taking market share from Intel (NASDAQ: INTC) in both the server systems and gaming rig markets. On top of AMD's sharp execution in recent quarters, Intel appears to have fumbled the manufacturing technology lead to the point where AMD can lean on foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM) to deliver seven-nanometer chip architectures while Intel's in-house manufacturing lines are stuck at 10 nm.

AMD has shaken off the cryptocurrency volatility to deliver shareholder gains based on solid business operations instead. If the company can deliver on those promised market-share gains, investors could be in for some more stock gains in the second half of 2018.

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Anders Bylund owns shares of Intel. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.