The undisputed star of the semiconductor space so far this year has been Advanced Micro Devices (NASDAQ:AMD). AMD stock price has gained more than 50% in 2019, as traders praised the firm’s efforts to take market share from its larger rivals and produce chips with unparalleled quality. But with AMD stock price near its 52-week high, many are wondering how much further AMD stock can rise in the back half of the year.
AMD Stock Has a Bright Future
It’s not hard to see why traders have been loving Advanced Micro Devices stock, since the company is indisputably on a roll. AMD has been successfully stealing market share from Intel (NASDAQ:INTC), and the firm’s upcoming earnings results are expected to confirm that its share of the PC market is growing.
Nomura analyst David Wong thinks that AMD’s share of the desktop-processor market will increase going forward. He predicted that the firm’s desktop processor market share would rise to at least 20% by December.
On top of what are expected to be rosy Q3 results, AMD has a lot going for it further into the future as well. News that the firm’s chips will power the next generation of Xbox consoles speaks to the quality products that Advance Micro Devices is offering. Plus, the company’s graphic processing units (GPUs) are a top choice for cryptocurrency miners, so AMD stock could be a big winner if blockchain gains more traction.
The Trouble With AMD
Unfortunately, a lot of the optimism towards AMD has already been baked into Advanced Micro Devices stock. Susquehanna Financial Group analyst Christopher Rolland said AMD’s control of 19.1% of the desktop market is likely to grow after the July 7 release of the company’s Ryzen 7 nanometer central processing units (CPUs). While that’s great news, it probably won’t move the needle on AMD stock much when the firm announces its results because traders have already priced it into the shares. As fellow InvestorPlace contributor Tim Biggam pointed out, AMD stock has become exceedingly expensive over the past few months.
That explains why the average price target among analysts covering AMD stock sits at $30.28, 10% lower than where the stock is trading today. There’s a lot of hype keeping AMD stock propped up, so the company would need a blowout quarter in order to deliver better than expected results.
Difficult Second Half
AMD stock looks like it’s already had its major rally. From here, it looks like things will get bumpy for the shares during the second half of the year. Not only will the owners of Advanced Micro Devices stock be exposed to risks facing the entire market, like tensions with China and weakening economic conditions, but they’ll be exposed to an added layer of risk simply because expectations for AMD are high. Any nugget of bad news could take AMD stock price considerably lower, especially during earnings season.
The Bottom Line on Advanced Micro Devices Stock
With that said, I believe patience is the only way to play AMD stock. For investors who picked AMD up when it was trading in the teens at the beginning of the year, it’s time for them to reevaluate their timelines. Those who want to hold AMD stock over the long haul should hold onto the shares because of the firm’s solid future, but they should be prepared for some turbulence. AMD stock price won’t rise forever, but if AMD can continue to grab market share from its larger rivals, the stock will deliver in the long-term.
For investors considering buying AMD now, I think patience is also key. AMD stock is likely to drop at some point over the next six months, creating a much better entry point. I’m not convinced that AMD stock price can rise much more this year, but 2020 and beyond is a different story.
The long-term growth potential of Advanced Micro Devices is undeniable, but I think other investments are more appealing at this point. Still, investors should keep AMD on their radar, in case a dip in the share price creates a more attractive buying opportunity.
As of this writing Laura Hoy was long INTC.