Investors in Advanced Micro Devices (NASDAQ:AMD) are accustomed to seeing shares make big moves. And usually the direction they move is up. Until last week, AMD stock had gained an impressive 388% over the past two years.
However, in the midst of marketwide panic over the coronavirus from China, AMD has been taking a serious beating. On Monday, it dropped 7.8% — more than double the losses for the NASDAQ as a whole, which closed 3.7% lower on the day. Since closing at an all-time high of $58.90 last Wednesday, AMD has dropped 9.5%.
The big drop, and the fact that AMD is being hit much harder than other tech stocks, is raising questions. The big one, of course, is will AMD recover from this selloff?
Coronavirus Takes Its Toll on the Markets, Wallops AMD
On Monday, the markets appeared to have finally woken up to the risks posed by the coronavirus. For weeks, the reaction to the news of the the virus and its spread in China had been relatively muted. But on Monday, with hot spots flaring up in Italy and other countries, many stocks felt the effect.
Amazon (NASDAQ:AMZN) dropped 4.1%, Apple (NASDAQ:AAPL) was down 5.04%, while AMD rivals Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) lost 4.13% and 8.16%, respectively. With its loss on the day of 7.8%, AMD stock was hit worse than most — though it fared just slightly better than NVDA.
Why the apparent concern over AMD (and Nvidia)? The two companies get the bulk of their revenue through the sale of video cards aimed at the gaming market. When the crypto currency mining market crashed in 2018, investors got a taste of what happens when sales of those video cards take a hit.
There is potential for the coronavirus to cause a similar drop in demand. If we end up facing a global pandemic situation, production could be affected and demand would likely drop. If the economy takes a hit, or people only venture out to buy essentials, a high-end computer or add-on video card will likely be low on their list of priorities.
A Lot Could Still Go Right for AMD in 2020
Despite the current doom and gloom, AMD still has some big moments to look forward to in 2020. If the coronavirus threat peters out, these all have potential upside for AMD stock.
Among the highlights, both Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) are releasing next-generation video game consoles, both powered by AMD chips. The company’s EPYC server processors have begun making inroads against Intel in the lucrative data center market. And at CES 2020, Advanced Micro Devices announced new Ryzen 4000 series mobile CPUs. These chips seriously outperform Intel’s mobile processors, and with over 100 Ryzen-powered systems already announced for 2020, AMD is finally in a position grab significant marketshare from Intel in the laptop market.
Bottom Line on AMD Stock
The coronavirus is wreaking havoc on stock markets, but AMD has some big moments ahead in 2020. That being said, no-one is expecting a situation where the company is going to see its stock explode in value like it did over the past two years.
Investment analysts were already taking a cautious approach to AMD before Monday’s big selloff. Those polled by The Wall Street Journal have AMD stock rated as a consensus “hold,” just as they did in January. Their average 12-month price target of $48.38 offers a meager 1.9% upside over the current post-selloff value. Now isn’t the time to sell AMD in a panic, but it’s not a “fire sale” buying opportunity either — despite the 9.5% slide since last week.
Still concerned about the damage a global coronavirus pandemic might do to Advanced Micro Devices through 2020? InvestorPlace’s Luke Lango has a list of stocks to buy on the dip that are well-positioned to weather the coronavirus storm.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.