It’s hard to believe there was a time when computer industry professionals pejoratively called Advanced Micro Devices (NASDAQ:AMD) “the poor man’s” Intel (NASDAQ:INTC). That descriptor is absolutely laughable today. In 2019, Advanced Micro Devices stock destroyed the markets, returning nearly 155% for stakeholders. That compare’s to INTC’s respectable but comparatively pedestrian 33% return.
More importantly, AMD is not content resting on its laurels. Instead, management has demonstrated killer instincts, sticking it to its longtime rival at the Consumer Electronics Show. The annual tech trade show attracts the best of the best, turning Sin City into Silicon Valley for four days. And what Advanced Micro brought to the table may sustain momentum in the AMD stock price.
Among the many chips and processors that they displayed for various computing applications, the biggest buzz was around the latest-generation Ryzen Threadripper. Designed specifically for content creators, financial analysts and other data-intensive users, the Threadripper features a whopping 64 separate computing cores on a single chip. That breaks a consumer-level record, undoubtedly whetting the appetite for Advanced Micro Devices stock. It’s also twice the number of cores of the previous-gen Threadripper.
Another innovation is the Ryzen 4000 Mobile, which is optimized for laptop applications. Though not independently tested, AMD claims that it can outperform Intel’s Ice Lake chips by a country mile. On paper, that adds to more pressure on Intel while bolstering AMD stock.
And what does Intel have to offer in response? Unfortunately, more excuses about supply shortages. To be fair, Intel showcased innovations in folding laptops. But in terms of processing prowess and power, it was overshadowed by AMD.
So, has Advanced Micro Devices stock become a no-brainer for 2020? Here’s my take.
Can Advanced Micro Devices Stock Match the Hype?
One thing I can say for certain about AMD is that its product innovations deserve high praise. From a business perspective, I appreciate the strategic shift from playing the discount-leader game to becoming a legitimate innovator. Perhaps the greatest victory is that for once, Intel is looking over its shoulders with envy at AMD stock.
If buying semiconductors was all about the underlying product, I’d give Advanced Micro Devices stock the green light without hesitation. However, there’s more to it than that. While AMD has competed impressively against its bigger and better-resourced rivals, the company is winning one component of the semiconductor game. And that component is becoming less relevant.
Now, don’t get me wrong — producing record-breaking processors is always a strong accomplishment. But the modern semiconductor industry is more than just fitting an increasing number of cores for high-speed performance. Rather, it’s putting all the cogs together for a cohesive platform.
Although Intel may have disappointed at CES, one company that stood out was Nvidia (NASDAQ:NVDA). Basking in the glow of last year’s Turing graphics processing units, Nvidia decided to debut other innovations for this year’s edition. One of those was a Toyota (NYSE:TM)-made robot that runs on Nvidia’s chips. Through a virtual reality setup, a human operator controls the lifelike robot.
In other words, Nvidia isn’t just sitting on its throne, pumping out faster and faster GPUs. To be sure, it’s doing that. But the company is also investing its resources toward groundbreaking innovations, such as robotics. More pointedly, making super-fast GPUs is becoming a commoditized exercise. The real money is pioneering novel platforms and applications.
This alone isn’t necessarily a knock on Advanced Micro Devices stock. But investors may want something different to justify driving shares higher.
Contrarianism Won’t Help the AMD Stock Price
As we all know, markets typically run in cycles. After a strong, sustained bullish run, investors often table profits and seek the next undervalued play. And with its recent annual returns, Advanced Micro Device stock is far from undervalued.
Furthermore, if I was a contrarian, I’d rather look at the other well-known semiconductors. As I mentioned earlier, Nvidia offers exciting innovations beyond GPUs. Late last summer, the company revealed their progress in developing conversational artificial intelligence. That could potentially launch its own tech subsegment.
If I really wanted to go contrarian, I’d look at Intel. Yes, the company looks like a blubbering idiot, but isn’t that a contrarian’s dream? After all, Intel is a great innovator going through a rough patch. Even if you were bearish on the tech firm, you got to admit that it won’t stay defeated forever.
Thus, the bottom line is that AMD stock has earned a seat at the table. Obviously, that’s worth something. But right now, the underlying company’s competitors offer a more attractive pathway to profitability.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
