Over the last four years, Advanced Micro Devices (NYSE:AMD) has been one of the most explosive stocks on the market. In that time, AMD stock has risen from just above $2 to $28.94. In 2018, it was the top-performing S&P 500 stock of the year, as it chipped away at Intel’s (NASDAQ:INTC) market dominance. In 2019, it’s again one of the top-performers.
Year to date, shares of AMD are up around 55%. That’s not bad when you realize the iShares PHLX Semiconductor ETF (NASDAQ:SOXX) is up just 36%.
The question now is — can AMD stock maintain this momentum, and stay this hot?
For the foreseeable future, the answer is yes. All as the company continues to chip away at market share from some of the biggest names in the sector, including Intel and NVIDIA Corporation (NASDAQ:NVDA). As long as AMD can expand as well as it already has, the stock could see further upside.
AMD Stock Has Rough Patches, But the Future is Bright
Panicked investors wasted little time hitting the sell button in August 2019.
After all, the company cut its guidance, warning that top-line growth for the year would be in the mid-single digits, as compared to earlier forecasts for higher-single-digit growth.
AMD pinned a good deal of that top-line guidance on softer demand for its semi-custom chips.
At the start of 2019, the company expected to see a 20% year-over-year decline in semi-custom revenue in 2019. However, as AMD saw that number increasing to a 35% year over year decline, it was forced to cut guidance.
As AMD CFO Devinder Kumar noted in the earnings conference call.
“For the full year, we now believe revenue will increase mid-single-digit percent over 2018, driven by significant sales growth of our new Ryzen, EPYC and Radeon processors, partially offset by lower-than-expected semi-custom revenue. Revenue, excluding semi-custom, is expected to increase approximately 20% year over year.”
We also have to consider that AMD saw hiccups in the gaming industry, as well.
At the moment, it appears consumers have been cutting back on gaming consoles from Microsoft (NASDAQ:MSFT) and Sony Corporation (NYSE:SNE), both of which use AMD chips. That’s probably one of the top reasons Sony cut its PS4 sales target by a million units to 15 million.
But the thing to remember is, that’s happening as consumers wait for the new generation consoles being released in 2020. In fact, Sony and Microsoft are releasing new consoles in 2020, and both have said the consoles will use AMD CPUs and GPUs. That alone offers AMD quite an opportunity.
AMD Stock Is Chipping Away at Intel’s Market Share
Even more impressive, AMD is chipping away at Intel’s lead in the CPU market. To that end, AMD has already released several new products this year, including its high-end graphics card and third-generation Ryzen CPUs, giving it quite an edge over Intel.
One report found that in the first quarter of 2019, AMD had earned 23.1% market share, as compared to Intel’s 76.8% share. In the second quarter, those numbers were the same. However, by the third quarter, the market saw a sizable shift. Thanks to Ryzen, AMD has 31.9% market share, as compared to 68.1% for Intel.
Another report found that AMD is pulling in about 5% market share, and could double to 10% by the end of 2020 thanks to the launch of Epyc microprocessor.
Market share expansion will certainty lead to further revenue growth, higher margins, and profit growth. All of that should continue fueling higher highs for AMD stock in years to come.
The Bottom Line on AMD Stock
While the stock has had its share of volatility with reduced guidance and trade war concerns, AMD still offers plenty of opportunity as it takes market share from Intel, especially as Microsoft and Sony prepare to release new gaming consoles.
For long-term buy-and-hold investors, AMD does appear attractive at current prices.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.