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The Outlook of AMD Stock Has Improved

Score one (or two) for chip maker Advanced Micro Devices (NASDAQ:AMD), and by extension, for the owners of AMD stock. The company just tiptoed further onto turf largely controlled by sector icon Intel (NASDAQ:INTC).

Partnership With Microsoft Bolsters Case for AMD Stock

Source: Casimiro PT / Shutterstock.com

Intel responded, of course, and not in an unsurprising way. The company’s next-generation Core-X CPUs, slated to launch this week, are going to cost notably less than its prior processors. On a per-core basis, the new CPUs (core processing unit) will cost less than $60, versus roughly $100 per core just one generation earlier.

Intel provided a glimpse of the price war that consumers and enterprises have been waiting for, though Intel and  Advanced Micro Devices would prefer to avoid fighting the war. Nor is the conflict going to be beneficial for AMD stock or the owners of Advanced Micro Devices stock.  That’s because, as in all actual wars, no side will truly “win” the conflict.

Still, all of the recent skirmishes between the two chip makers over market share bolster the bullish case for Advanced Micro Devices stock.

Advanced Micro Devices Is Catching Up

For all of AMD’s ongoing PR efforts, Microsoft (NASDAQ:MSFT) was mostly responsible for AMD’s recent, compelling headlines. Putting more emphasis on its hardware business these days, MSFT opted to use an AMD-made CPU in its newest flagship laptop, the Surface Laptop 3.

A Ryzen processor, custom-built to meet MSFT’s needs, is powering the Surface Laptop 3. The 12-nanometer processor works well with AMD’s discrete graphics processor which is also being utilized by the laptop.

Microsoft still intends to offer a Surface Laptop 3 powered by an Intel CPU. But MSFT’s decision to unveil a new AMD-powered laptop is also clearly something of a wake-up call for Intel.

Recently, in outcomes that bode well for AMD stock, Intel has lost other skirmishes which should have been easy for it to win,

Specifically, Advanced Micro Devices launched a handful of PRO processors that will power some of Lenovo’s (OTCMKTS:LNVGY) ThinkCentre desktops, and it unveiled some of HP’s (NYSE:HPQ) EliteDesk 705 G5 Series desktops.

Simply put, computer manufacturers are increasingly interested in AMD’s high-performance processors that cost considerably less than those made by Intel.

The numbers verify that statement. In Q2, AMD’s global desktop CPU market share was 17.1%, up from just 12.3% a year earlier. That’s definitely positive for AMD stock.

One of the main reasons for AMD’s success is its customers’ ability to improve their graphics and overall performance by combining AMD’s graphics cards with its processing units.

Although Intel now also makes its own graphics cards, Advanced Micro Devices remains well ahead of its bigger rival when it comes to effectively combining graphics cards and processors.

Looking Ahead for Advanced Micro Devices Stock

AMD stock price surged on the news that its wares would be found in the upcoming Surface laptop, one of Microsoft’s more important products. It was a vote of confidence from one of the titans of the tech industry. As a result, this is a make-or-break time for AMD’s turnaround effort and for Advanced Micro Devices stock.

The rally of AMD stock price didn’t last. And even after the sizable pullback from its early-August high, Advanced Micro Devices stock remains overbought. After the huge 2018 rally of AMD stock price,  the shares may well already fully reflect the company’s recovery. Further, investors are still trying to figure out what growth — if any — lies ahead for AMD.

On a grander scale, though, AMD’s Microsoft partnership looks like a big win for the chip maker and should boost AMD stock over the longer term.

Although Microsoft and Advanced Micro Devices have not yet announced that they’re working on another product together, they probably have started doing so. Presumably, Lenovo and HP are also collaborating on new, upcoming products with AMD. The world is liking what AMD is offering again, and that puts the owners of AMD stock in a pretty good position.

As of this writing, James Brumley did not hold 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.

Article printed from InvestorPlace Media, https://investorplace.com/2019/10/the-outlook-of-amd-stock-has-improved/.

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