Without a hint of hesitation, Advanced Micro Devices, Inc. (NASDAQ:AMD) was one of the top flyers of 2016. Producing a 300% annual return and leading the dynamic semiconductor market will do that for you. The question now is whether or not AMD stock has something left in the tank.
Ardent AMD bulls hate the inquiry, but it’s something that has to be asked. Advanced Micro rival Nvidia Corporation (NASDAQ:NVDA) also had a stellar run in 2016.
The pivotal difference, of course, is that Nvidia is still giving its competitors fits. Year-to-date, NVDA is up 98%. Short of a catastrophic event, Nvidia will again post a stellar year.
But for the AMD stock price, a cloud of doubt hangs overhead. Currently, shares are barely above parity. In order to come close to having a great year (let alone something approaching its chief rival) a tremendously bullish catalyst must appear.
Even Intel Corporation (NASDAQ:INTC) is making a lot of noise, with its shares up 23% YTD.
Naturally, many Advanced Micro supporters are unfazed: they saw this rodeo before in 2015 and look what happened the following year. The problem with that argument is that the stories that pushed the AMD stock price into the stratosphere are no longer fresh.
In other words, everybody has seen AMD’s playbook.
As far as I know, NFL teams constantly update their playbooks every season to maintain their competitive edge. And I do know that the markets don’t trade on old news; otherwise, what would drive people to risk incarceration for insider information?
Still, the AMD stock price quadrupled over a two-year period, affirming its immense progress. But will its recent improvements be enough for a standout performance in 2018?
AMD Stock Must Overcome a Stronger and Prepared Competition
Anyone who doubts Advanced Micro should take a quick look at its credentials. As InvestorPlace writer Tom Taulli points out, AMD’s attention towards bang-for-the-buck performance bodes well for its Ryzen CPU and Radeon Vega graphics card.
Especially with the latter, video gaming is serious business, so the Vega should do well for the company.
Additionally, AMD stock is boosted by management’s aggressive push into the datacenter market. Although Intel dominates the sector, AMD “has snagged customers like Hewlett Packard Enterprise Co (NYSE:HPE), Dell, Microsoft Corporation (NASDAQ:MSFT) and Baidu Inc (ADR) (NASDAQ:BIDU).”
If Advanced Micro operated in a vacuum, it would be easy to call the AMD stock price. However, no one’s going to make it easy for the semiconductor firm.
Intel is stepping it up a notch with its upcoming Coffee Lake processors; coincidentally, Intel borrowed from AMD’s playbook, whereby Coffee Lake combines performance and value.
More critically, Intel is going to push back against AMD in the datacenter sphere. Also, Nvidia is eyeing a revenue stream here as well.
Competition isn’t the only dilemma. Rather, investors must ask if Advanced Micro has the capacity to counterstrike. I think this is the main issue when speculative bulls claim “the fundamentals don’t matter.”
Actually, they do. AMD’s rivals simply have more resources to put into research and development. This is the clear disadvantage of punching too far above your weight class.
AMD Can’t Ride the Same Story
No matter what side of the fence you’re on, we can all agree that the AMD stock price is directionless. While it has strong attributes, not enough new catalysts exist to push it higher; hence, I see only a 50/50 proposition.
I think our own Vince Martin said it best. He wrote:
“In 2016, the gains were based on the new product launches and AMD’s potential to finally, legitimately compete with the market leaders. Now, the story is about how well AMD will compete. With Intel ramping up its own game, that’s a much tougher, less compelling story, and it seems to explain why AMD stock is struggling to gain traction.”
Technically, the charts confirm the frustrating consolidation. AMD is doing enough to prevent current shareholders from jumping ship altogether. At the same time, it’s not doing enough to spark another great rally. Thus, this market remains firmly in the hands of speculative traders.
I suspect, though, that even they don’t care for the sideways action. For long-term holders who won big in 2016, it wouldn’t be bad idea to take some profits off the table. The longer this consolidation keeps up, the more likely the rest of the markets will look for something that moves.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.