Over the past five years, Advanced Micro Devices (NASDAQ:AMD) has significantly improved its product offerings and become more competitive in the marketplace. This is largely thanks to the guidance of CEO Lisa Su, who took over as chief in 2014. In that time, AMD stock rose from the $4.00 per share neighborhood to a 14-year high in August, before paring gains to the current $30.56 level.
But Wall Street has been divided when it comes to AMD in the last year. Out of the 22 analysts following Advanced Micro Devices stock, nine have buy ratings, 12 have a hold, and one is advising investors to sell.
There are many reasons for this uncertainty. Like many companies, AMD has been hit by the trade war concerns. And the company still struggles to take market share from its Intel (NASDAQ:INTC), one of its biggest competitors in the server CPU industry.
However, I think AMD stock has a lot more potential than analysts give it credit, and I believe there are three reasons behind this potential.
AMD is Gaining in Server Processors
The server processor market has always been a tough area for AMD. Intel has controlled as much as 90% of the market share in this area. But this may be starting to change.
A recent survey conducted with over 500 IT professionals found that some enterprise companies are beginning to prefer AMD to Intel. Some 16% reported using AMD processors, citing the company’s superior value proposition. That number is expected to increase to 21% in the next two years.
Most recently, AMD released its new 7-nm processors which finally seemed to give the company an edge on Intel’s product offerings. These processors will deliver more efficiency and better performance overall.
Product Offerings Continue to be Improved
To piggyback on that last point, AMD continues to up its game with its newest product offerings. In years past, AMD constantly found itself playing catch-up to Nvidia (NASDAQ:NVDA) and Intel. But this may be starting to change.
This summer, the company launched its first Navi-based graphics cards. These graphics cards outperformed Nvidia’s current offerings and matched it on pricing. It can be expected that these GPUs will be used in many gaming consoles in the coming years.
Many of AMD Stock’s Problems are Short-Term Issues
Since they do a lot of business in China, chipmakers are caught in the middle of the ongoing trade war between the U.S. and China. Nvidia has seen its shares fall more than 40% over the past year on these concerns.
Of course, AMD has struggled for reasons outside of the trade war. It also got stuck with an oversupply of graphics inventory in the midst of the cryptocurrency bust. And the company’s revenue fell by 13% during the second quarter.
But all of these are short-term problems and don’t take away from the company’s long-term growth prospects. AMD is well-positioned and should be able to take advantage of a number of opportunities in the coming years.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned stocks.
