Left for dead long ago, Advanced Micro Devices, Inc. (NASDAQ:AMD) has made a remarkable resurgence in recent years. AMD stock obliterated the competition in 2016, turning in its greatest annual haul in its history.
Better yet, Advanced Micro is doing all it can to keep positive momentum alive. Year-to-date, shares are up nearly 19%.
The question of course is whether that’s enough to keep investors interested. The last few months hearkened the return of the old AMD stock: severe selloffs combined with wild and choppy trading. Its rivals in the semiconductor sphere, including Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA), are in the same boat but at least they have financial stability and more powerful brand recognition.
Despite the stomach-churning volatility, Wall Street is still keen on AMD stock. Early last month, Apple Inc. (NASDAQ:AAPL) made the shock move to incorporate Advanced Micro graphics cards for its new iMacs. Additionally, InvestorPlace contributor Brad Moon reported that “… the high-profile new iMac Pro will sport the all-new AMD Radeon Pro Vega graphics card when it launches in December.”
This is a huge deal for AMD, not only in securing a whale like Apple, but also in giving the one-finger salute to Nvidia. Indeed, Advanced Micro corporate vice president Joe Cox vocally took pleasure in dethroning its fierce rival. Not coincidentally, AMD stock got a big boost off the announcement.
On top of the Apple deal, Advanced Micro has just recently launched Epyc, which is a server CPU that’s aimed at tackling the data center market. According to InvestorPlace’s Brian Wu, Epyc is a massive opportunity that could fundamentally change how we view AMD.
But will these developments translate to gains in the markets?
AMD Stock Is Far From Declaring Victory
On surface level, the Apple deal is a compelling one for Advanced Micro. Nvidia dominated the graphics card sector for several years, so it’s a great feeling to “get one back.” At the same time, they’re picking a not-so-ideal moment to play the one-upmanship game.
The once mercurial and unstoppable Apple stock suddenly looks vulnerable. This time, it may be more than just technical trading at fault. Earlier this month, I warned that “peak smartphone” impacts Apple’s ability to accrue reliable financial benefits from its tech devices. Too many options exist for today’s consumer. Even worse, aside from the price point, it’s hard to distinguish one smart device from another.
Obviously, smartphones are a tad bit different from the PC market. Then again, it’s the similarities between them that may negatively impact AMD stock. Both are extremely saturated with competition. Furthermore, while Macs gained market share, while the broader PC sector declined, Apple computers only represent a small position. Essentially, AMD won a battle that’s unlikely to change the company’s broader trajectory.
What shows more promise is the Epyc server CPU. As Mr. Wu emphasizes, “Advanced Micro Devices has been making aggressive performance claims regarding the new chip.” This includes far greater performance than Intel’s competitor processor, Xeon, while delivering the system at a lower price tag.
To Wu’s point, it certainly does seem that AMD caught Intel napping. But another colleague of ours, James Brumley, warns that Epyc is untried. Brumley writes, “Given the choice between a familiar name and a less-proven data center player, odds are good data center managers are going to lean towards Intel.” He also points out that Intel can play catch-up with relative ease.
The Sentiment Is Great But Where’s the Money?
As with any spirited debate about a publicly traded company, I turn to the technicals. If AMD stock is worth picking up based on the aforementioned tailwinds, then it should be reflected in the charts. The problem is that the markets appear pensive at best.
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Bullish proponents may argue that since collapsing in early May, Advanced Micro shares are up 26%. But this margin is only impressive from a “standalone” perspective. Against the May 1 close just prior to the collapse, AMD is down 4%.
More worryingly, shares are still down double-digits from this year’s closing high of $15.20. If the long-embattled company was truly ready to take on rival Nvidia, I assume more investors would jump aboard.
I’d double that sentiment if AMD was a bona-fide Intel killer.
Instead, Advanced Micro still looks like the eager upstart trying to get a seat at the big boy’s table. The company engineered a turnaround that is nothing short of miraculous. They should get a lot of credit for that. But successfully overthrowing the established leaders will take a lot more effort. I’m just not sure if AMD has the resources to pull it off.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
