Following a difficult, but constructive August, Advanced Micro Devices (NASDAQ:AMD) is offering today’s investors an attractive way to invest in the future of AMD stock at a discount. Let me explain.
If timing is everything, AMD’s surprise announcement one month ago that Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Twitter (NYSE:TWTR) are using the company’s second-generation EPYC chips in their data centers couldn’t have come at a less opportune time. Nevertheless, despite a trade war-induced, risk-off market environment at the time, the news, was and is, huge for AMD stock.
Bottom line, Intel (NASDAQ:INTC) is the 800-pound gorilla with a near monopoly in the cloud and large-enterprise markets. As much, AMD’s addition of Google and Twitter to its list of enterprise clients is a big win. But there’s more reasons to see plenty of upside for AMD stock.
Advanced Micro Devices’ customer base already includes Microsoft (NASDSAQ:MSFT) and Hewlett Packard (NYSE:HPE), among others. Thus, Alphabet and Twitter’s business is simply the latest evidence of growing support. And with just 2% of the data center business, it would be hard to disagree with Atlantic Equities which sees AMD taking as much as 25% of this key market away from Intel over the next decade.
AMD Stock Weekly Chart
On the AMD stock price chart Wall Street showed its enthusiasm for the company’s business wins. Shares of Advanced Micro Devices soared more than 16% in the immediate aftermath and hit fresh relative highs the following session. The better news is if timing is everything, then in today’s market AMD is an even better buy.
One month later, Advanced Micro Devices gave back the bulk of its Alphabet and Twitter-fueled gains. A challenging, but technically constructive August resulted in a bullish market follow-through day signal on Aug. 13. AMD stock investors are being offered an attractive discount to last month’s news-driven reaction. However, I’d wait before making a purchase decision.
The truth is last month’s EPYC news vaulted shares out of technically fragile situation where key longer-term and uptrend support narrowly failed in unison. The brief betrayal is highlighted in yellow and it’s enough to give pause regarding buying on weakness. Given today’s more supportive market for buying momentum, I’d propose investors postpone today’s discount in AMD stock in favor of supportive price confirmation.
The Bottom Line on AMD Stock
My advice is to put Advanced Micro Devices on the radar and wait for a move through $32.25 before buying.
The entry sacrifices roughly 5% of upside from today’s AMD stock price. More important, this strategy only buys shares on the condition of a breakout above multiple failed attempts near $32. And given a much healthier market for today’s buyers — that’s a smarter way to invest in the future of AMD stock at a discount.
Disclosure: Investment accounts under Christopher Tyler’s management currently own positions in Advanced Micro Devices (AMD) and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.