Last month, I suggested buying Intel (NASDAQ:INTC) stock on its recent dip because it’s Intel. Though Intel is definitely beleaguered, the depth of the selloff was overdone, as it suggested that the tech giant is beyond salvaging.
But my recommendation to buy INTC stock doesn’t necessarily mean that I think investors should avoid Intel’s rival, Advanced Micro Devices (NASDAQ:AMD. Indeed, AMD stock may also be well-positioned to continue its forward progress, but for an entirely different reason. Whereas Intel was simply oversold, AMD has created a long bullish runway for itself by developing several Intel-beating technologie.
If that reality wasn’t clear by now, it was certainly made clear by Advanced Micro Devices at this year’s Computex event.
More PC Market Share
A little over three years ago, Advanced Micro Devices was a has-been. It had lost the PC/server war to Intel, and largely failed to show up for the mobile war, as it had surrendered that sector to rival Nvidia (NASDAQ:NVDA). From its 2010 peak to its late-2015 trough, AMD stock price had lost more than 80% of its value. More than a few owners of AMD stock feared more losses were in the cards.
Enter Lisa Su. In 2014, the qualified and capable tech genius, who did not seem like a turnaround artist at that point, took the helm of the struggling company, bringing with her a plan. Her first priority was to start making better hardware.
The 2016 launch of i AMD’s Ryzen series of CPUs followed shortly thereafter by its then-new Vega GPUs, marked the beginning of a turnaround that would ultimately start to chip away at Intel’s market share. Last quarter, Advanced Micro Devices claimed 13.3% of the PC processor market, up from 8.6% a year earlier.
More market share gains may be on the way for AMD, given the impressive performance of its new Ryzen processor at last week’s Computex event. Its new Ryzen 9 3900 third-generation CPU boasts 12 cores and 24 threads, facilitating boost speeds up to 4.6 Ghz. Despite all that raw power, the processor will retail for a modest $499 when it officially launches on July 7. Comparable processors from Intel currently sell for $1100 and higher.
Stifel’s semiconductor equities analyst, Kevin Cassidy noted “This announcement represents the first time AMD has taken the desktop CPU process-technology and performance lead from Intel in its 50-year history,” which in turn could allow AMD “to accelerate its PC market share gains due to higher performance, lower power usage, lower cost and ease of upgrade.”
Cowen analyst Matthew Ramsey concurs, explaining “We anticipate these products will drive above-consensus growth, share gains, margin expansion and AMD share appreciation.”
Cracking the Server Market
Perhaps the biggest opportunity AMD has in front of it right now, however, is data centers, the market it hasn’t yet made much of a dent in yet.
A year ago, AMD’s share of the server and data center market was a scant 1%, according to Mercury Research.That metric has improved to 2.9% in the meantime.
More than that, though, Advanced Micro Devices’ latest iteration of its EPYC server chips could prove to be a much-needed game-changer.
AMD’s ‘SCH’ (integrated server controller hub) tech can radically improve the performance of data centers. Those chips should launch next quarter at what should prove to be a notably better price than anything comparable from Intel.
In another potential, bullish development for AMD stock, AMD’s EPYC Rome chips will be utilized in what will become the world’s fastest super computer. Supercomputing isn’t a high-volume business, but it provides great publicity.
A bigger opportunity for AMD and AMD stock is graphics cards. AMD just made a great stride on that front, too. Its Radeon RX 5700 card, built on 7nm Navi architecture, will hit the market in July, boasting performance improvements that could take a bite out of Nvidia’s share. This top-of-the-line hardware delivers a 25% increase in instructions per cycle.
The Bottom Line on AMD Stock
Superior hardware, fair or not, isn’t necessarily a recipe for fiscal success. Companies as well as consumers can be strangely brand-loyal, often ignoring price differentials that arguably should matter.
But Advanced Micro Devices’ technical progress has definitely made it relevant,. More than that, it’s delivering better performance at roughly half the retail cost Intel still expects to command. AMD’s latest round of technological improvements will continue to enable it to increase its sales, and more importantly;, will allow it to finally start raising its margins.
Expect more volatility from AMD stock because, right now, that’s just the market’s environment. But AMD stock is most definitely a buy-on-the-dip name. It could be years before Intel fully regroups and is able to undo the damage Advanced Micro Devices has done to it.
As of this writing, James Brumley did not have a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.