A few weeks ago we took a look at Advanced Micro Devices, Inc. (NASDAQ:AMD). Given its fall, AMD stock price appeared to be at a make-or-break level. Those are perfect for traders because it gives them excellent risk/reward entry points.
If they’re wrong, they can get out with minimal losses. If they’re right, they can use a stop-loss to protect profits and get on for what’s hopefully going to be a long, profitable ride. So what do we make of AMD stock and has it lost vital support?
Trading AMD Stock Price
Let’s look at the charts first, because many traders are in this name and they don’t care too much for the fundamentals. We have very clear resistance up near $15, but that’s far from our concern at this point. Right now, this big level of support has given way. What now?
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A disciplined trader is out of the stock. When support goes, AMD stock or any other isn’t one to mess around with on the long side. Typically, we wait for support to resurface and we go from there. I will say though, there is one extra layer of support that could come into play.
We’ll call it $9.75 on the second chart, but this horizontal level of support has played a role in the past. For traders, this level is significant. If it fails, AMD stock price could head to $9 and then possibly even to $8. It depends on what the overall market is doing too. As it stands though, AMD is on one of its last legs of support.
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Does It Matter for Investors?
This is a tough question to answer. To some degree, no it doesn’t. While a 10% to 20% drop isn’t something to dismiss, it’s also not the end of the world if one is investing for the long term. Investors have to use risk/reward measures too, but they shouldn’t be as sensitive to short-term gyrations in the stock price like traders.
On the fundamental front, AMD is doing a lot better. It’s cutting debt and growing sales. It’s hard to do that without improving margins and thankfully, that’s the case. As the company teeters on net profitability, its underlying fundamentals are all improving.
That’s great news for patient investors who can sit through the volatility. But we covered a lot these catalysts last time we looked at the stock. What’s changed since then?
On Tuesday AMD announced that it will work with Qualcomm, Inc. (NASDAQ:QCOM) “to bring smooth and fast PC connectivity solutions to AMD’s high-performance Ryzen mobile processors.” AMD’s Ryzen unit is a growth arm of its core business, so bolstering it is important.
Along with partnering with Intel Corporation (NASDAQ:INTC), AMD should make far more meaningful progress in the PC. On the same day though, AMD also announced its recent work with Microsoft Corporation (NASDAQ:MSFT) and its Azure business.
This one’s exciting. Microsoft is the No. 2 player in the cloud, behind Amazon.com, Inc. (NASDAQ:AMZN) and ahead of Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG). Cloud storage and data center businesses are not going anyway.
In fact, many of these businesses are still experiencing monster growth. We’ve written extensively about Microsoft’s cloud business and in particular, the incredible growth of Azure. That makes me feel bullish about AMD’s cloud business.
The Bottom Line on AMD Stock
For traders, AMD stock price is hovering near true make-or-break territory. However, if investors are looking out beyond just next quarter, it’s clear the catalysts are lining up. Cash flow, revenue, debt and earnings are all heading in the right direction.
AMD is partnering with MSFT and QCOM to help elevate its business. It’s even partnering with competitor Intel in an effort to battle Nvidia Corporation (NASDAQ:NVDA). Make no mistake, Nvidia is the market leader. It’s not sacrificing profitability or market share, despite the new AMD products.
That’s discouraging for Advanced Micro, as it has to undercut Nvidia on price. But that’s the way it goes and given the growth in these end markets, there’s more than enough room for two players. There’s still time (and a low-risk opportunity) to buy AMD.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a long position in AMD.
