Advanced Micro Devices (NASDAQ:AMD) announced Dec. 20 that AMD stock had been added to the NASDAQ-100 Index, the largest 100 non-financial stocks listed on the Nasdaq. That’s a big step up for a company whose stock traded below $2 as recently as October 2015.
“Joining the NASDAQ-100 Index further demonstrates the progress we’ve made in recent years to transform the company, execute our long-term strategy and deliver a robust product and technology roadmap,” said AMD senior vice president Ruth Cotter about the inclusion.
Make no mistake, 2018 was an excellent year for Advanced Micro Devices stock, up 74% year-to-date through Dec. 26, outperforming all 99 of the other index’s components.
The question is whether AMD stock has anything left in the tank to come anywhere close to replicating 2018’s performance.
I don’t think so. Here’s why.
It’s Not Personal
I last wrote about AMD in September — twice actually — and on both occasions, I was positive about its future.
In my article from early September, I acknowledged that I’d underestimated the effect CEO Lisa Su’s leadership would have on the company.
Although I thought Nvidia’s stock would hit $500 by the end of 2020, well before AMD hit $45, the fact that NVDA lost 31% of its value in 2018, suggests the race will be a lot closer than initially thought.
At the end of September, I took a leap of faith given AMD’s momentum, suggesting its stock could hit $40 in a worst-case scenario by the end of March, recommending those holding AMD stock to continue to do so.
We know what happened next. Semiconductor stocks went in the toilet with Advanced Micro Devices stock losing 44% of its value over the next three months.
Not great timing, I’ll admit, but Su has transformed the company, which is something given the intense competition it faces.
There Could Be More Pain in 2019
In mid-December, I wrote about Micron Technology (NASDAQ:MU) stock, another tech company I feel is a good long-term hold.
I noted that out of 44 semiconductor stocks with a market cap greater than $2 billion, 32 were down more than 10% over the previous three months.
A staggering three-quarters of the stocks were down more than 10%. Two weeks later, that number’s up to 34 over the past 90 days. It’s not an encouraging statistic.
Ultimately, here’s what I said about Micron:
“Add to the possibility of a recession, the fact semiconductor stocks are one of the most cyclical industries out there, and I believe MU stock and all the other big players aren’t a good investment idea heading into 2019,” I wrote.
“It’s time to play defense.”
Indeed it is.
The Bottom Line on AMD Stock
Unless there’s mind-blowing AMD news in 2019, I’m hard-pressed to recommend its stock, not because I think it’s not worth owning, but because 2019 is lining up to be a down year for the entire industry.
I hope I’m wrong.
But just in case I’m not, a good defensive move for the AMD stock fan would be to buy the Invesco QQQ (NASDAQ:QQQ), which tracks the NASDAQ-100. In the same three-month period, QQQ lost 17% of its value, much less than both AMD and Nvidia.
Consider it the conservative way to bet on technology without losing your shirt.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.