Last year, semiconductor firm Advanced Micro Devices (NASDAQ:AMD) finished the year at the top of the pack. Advanced Micro Devices stock ended 2019 as the top performing S&P 500 stock, with gains just shy of 150%.
But it may not be time to take profits just yet — AMD stock looks likely to continue its impressive rally in the year ahead as the firm continues to grab market share from its larger competitors.
AMD Shines at CES
This week, the tech world gathered in Las Vegas to show off the latest and greatest developments for the year ahead. Advanced Micro Devices was a notable attendee and the firm didn’t disappoint as it unveiled a new line of microprocessors designed for use in laptops.
AMD CEO Lisa Su said in a press conference that the company currently has over 20 processors either in the market or in development across a range of industries including data centers, graphics, and now laptops.
The firm’s new laptop processors optimally fit ultra-thin laptops, which consumers, gamers and professionals prefer. The chips aimed at consumers and gamers are expected to outperform Intel’s (NASDAQ:INTC) comparable components. Laptops including AMD’s new line of processors are due to ship in the first quarter.
Beating Intel Across the Board
AMD also debuted the 3990x, a high-end desktop processor that it claims is also superior to Intel’s offering. The AMD chip can render images 30% faster than its Intel counterpart and the chip is due to start shipping in February.
The news should be music to investors of Advanced Micro Devices stock, as it suggests a promising start to 2020. AMD has been gaining traction against Intel for the past year, first beating the firm to market with its 7-nanometer chips and now closing the gap between the two in the PC space.
Execution Is Everything
Advanced Micro Devices stock bears say the firm’s smaller size will eventually allow larger competitors like Intel to catch up. After all, they are better funded which gives them more control over pricing and allows for a larger research and development budget. However, if AMD can continue to produce superior products, size will remain a moot point.
So far, AMD’s smaller size hasn’t been a factor. That could change if AMD’s chips don’t perform as expected or the company struggles to effectively manage its supply chain. Execution will be paramount this year as investors look for over-the-top results from AMD stock.
As a result of its 2019 rally, Advanced Micro Devices’ stock price has become undeniably high. That’s okay as long as AMD can live up to those expectations. Over the past eight quarters, AMD has been able to grow its market share in the CPU market and analysts see the firm doubling its data center market share by mid-2020.
So far, AMD is off to a good start in living up to those expectations as the firm kicked off the year with a bang. But it’s worth noting that AMD is walking a tightrope right now as investors will be expecting nothing less than stellar results in the year to come. At this point, many are likely looking for a reason to take profits, so a pullback at some point in 2020 is likely.
Room to Run
Still, plenty of people still think AMD is going places this year. Nomura’s David Wong is expecting Advanced Micro Devices stock to make its way to $58, an 18% upside from where the stock trades today. Wong cited AMD’s impressive new product lineup and continued market share growth as reason for his optimism. He said AMD’s desktop market share is likely to rise to between 20% and 25% as the firm’s new chips gain traction.
Bottom Line
For now, Advanced Micro Devices stock looks like it’s going places. The firm has placed itself firmly in front of Intel when it comes to product quality, and that should help drive market share growth in the year ahead.
While we may not see triple digit gains again this year, AMD’s strong position and superior products make it a great long-term bet in the semiconductor space this year.
As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.
