Advanced Micro Devices (NASDAQ:AMD) consistently squares off against the world’s toughest competitors in the most lucrative markets. Yet despite this extraordinary challenge, AMD stock has put up blistering numbers. This year is no different, with shares up nearly 83% since the January opener.

What makes this accomplishment so impressive is that Advanced Micro Devices stock has been a different animal since the end of September. Over the past month-and-a-half, AMD has dropped 38% in the markets. The enigma, of course, is that the company both deserves its accolades and its lumps.

On the positive end of the scale, AMD has gained market share against long-time archnemesis Intel (NASDAQ:INTC). Specifically, AMD shook the semiconductor industry, signaling its intent to produce 7-nanometer server chips in 2019. In contrast, Intel has suffered significant production delays for its 10-nanometer chips, which in theory are lesser-powered.

One of the best arguments against diving into AMD stock, however, is its insane outperformance. By mid-September, shares had more than tripled in value since the start of 2018. At some point, we were going to see a correction, which is exactly what happened.

But with Advanced Micro Devices stock absorbing a severe 9.5% drop on Monday, is this a contrarian opportunity for speculators or a clear sign to get out?

The Bull Case for AMD stock

More often than not, I’ve doubted AMD stock and its ability to compete against the big boys. As history has demonstrated, I haven’t won much of these battles. But despite my hesitations, even I must admit that shares look enticing at these levels.

First off, AMD’s foray into 7-nanometer chips is important because the company is now proving to be a technological leader. The ability to create smaller, more power-efficient chips leads to the possibility that AMD can maintain its advantage longer-term.

In recent news, the company made a groundbreaking partnership with Amazon (NASDAQ:AMZN). AMD’s EPYC server-specific processors are now available for use on the AWS cloud platform. This is a massive achievement as AWS led in the cloud-computing department with a 52% market share in 2017.

More importantly, AMD proved that it can diversify beyond its gaming and blockchain-specific graphics processing units, or GPUs. Of course, these segments represent huge dollars for the semiconductor firm. However, it’s another thing entirely to punch above your weight class and win some bouts.

Intel has long considered the server market one of its core money-makers of tomorrow. Thanks to its vast resources, INTC should easily win this war. However, AMD has the technological momentum with its next-generation server chip called “Rome,” and now the PR momentum with Amazon.

The leadership team is looking to steal significant market share from Intel, and its goals are definitely realistic. That aspect hasn’t changed despite Advanced Micro Devices stock tanking, which currently makes shares so tempting.

Reasons to Avoid Advanced Micro Devices Stock

Not everything, though, is roses and sunshine for AMD stock. A significant headwind working against long-side shareholders is the lack of fresh catalysts.

This dynamic was on full display during its most recent earnings report for the third quarter. Based on its earnings print, AMD delivered a solid report, beating its consensus earnings target and matching revenue expectations.

However, Advanced Micro Devices stock cratered shortly after the Q3 disclosure. Part of the reason was that the earnings performance was muted relative to prior results. But the biggest factor was the disappointing guidance.

For Q4, management expects revenue to come in around $1.45 billion. However, analysts expected $1.6 billion, perhaps even higher. After all, AMD’s aggressive move into 7-nanometer chips didn’t materialize overnight. If the company really believes it can chip away at Intel, how come their guidance didn’t reflect their vocalized confidence?

Another reason not to jump too deeply into AMD stock is that Intel isn’t a pushover. Sure, INTC has had its problems, but head-to-head, it’s simply a better financed and more stable organization than Advanced Micro. Should things not go according to plan next year, investors could run to Intel (or some other name) for shelter.

Bottom Line for AMD Stock

If you’re a speculator and you’re prepared for sudden volatility, I like AMD stock as a calculated gamble here. Shares are back down to where they were in early August, which is a tremendous discount.

Plus, I don’t see any evidence that AMD has incurred the kind of technical damage that would drop prices below a critical threshold. An example would be its 200-day moving average, which currently sits at $17.29.

However, if you’re a conservative investor, I don’t think AMD stock is an appropriate choice. While its depressed price point entices, both the broader markets and the tech sector are jittery. That means you can almost guarantee Advanced Micro will go on a bumpy ride.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.