Advanced Micro Devices, Inc. (NASDAQ:AMD) is a niche player in the massive semiconductor chipmaking sector. And that’s the perfect place to be right now.
While Intel Corporation (NASDAQ: INTC) is dealing with its Meltdown and Spectre security issues, AMD has escaped the worst of it. Meltdown is primarily an Intel problem, while Spectre is also an issue for AMD.
Both vulnerabilities were built into chips to allow them to run faster. It’s possible to patch the problems with software, but that may hurt performance. Hackers can use these vulnerabilities to access data that up until now was thought safe from any outside access.
Not being Intel right now is a very good thing. For example, year to date, INTC stock is down about 1% while AMD stock has risen more than 23%.
Both these security issues are hardware problems with fundamental chip designs that go back decades. And these design flaws are built into virtually every chip in the marketplace today.
That means, on one hand, there’s not much anyone can do and it’s no one’s fault in particular. On the other hand, the bigger chip makers like Intel carry a larger part of the problem since they have more chips out in the marketplace.
What’s more, the problems that occur with Spectre are a bit easier to sort out.
Certainly, this is a problem, but since AMD is smaller than many of its competitors, it is able to move to correct these issues more quickly. This could be a boon for AMD if it can make the pivot fast enough.
On the other side of the business, AMD is the No. 2 graphic processors behind data visualization giant Nvidia Corporation (NASDAQ:NVDA). While it has no real chance to catch up or surpass NVDA, it has a very strong position in the sector as the No. 2 player, with a good size moat around it.
And AMD is currently building discrete Radeon graphic cards for Intel core processors for Apple Inc.’s (NASDAQ: AAPL) iMac Pro.
Another interesting development will be the huge surge in cryptocurrencies. To mine these currencies takes huge processing power. And as the demand grows for these coins, so will equipment to mine them. And given the security vulnerabilities and speed challenges for Intel processors, it may give AMD a leg up in this market, since currency miners are very protective of their efforts.
AMD is expected to release Q4 earnings next Tuesday. And that may have to do with some of the movement in the stock price. But it may also have to do with AMD lowering guidance in Q3 for Q4, ahead of the security mess.
Regardless, AMD is in a very solid position moving forward, even if it only brings in muted earnings for the quarter.
AMD stock tends to be more volatile than the other chipmakers, given its size. But the trend is up, so don’t sweat the short-term moves; keep your eye on the long term.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
