2 Reasons Why Advanced Micro Devices Will Thrive in 2021

Advanced Micro Devices (NASDAQ:AMD) is a chipmaker that has made the most of the pandemic. In fact, AMD stock is at some of its highest performance levels in recent memory.

Image of the Advanced Micro Devices (AMD) logo outside of a corporate building
Source: Sundry Photography / Shutterstock.com

Now, the company is looking to expand its market share this year. Once traded in the $2 range, AMD currently changes hands closer to $100. More precisely, after reporting stellar fourth-quarter results, AMD stock has dipped to a little over $86 today. 

If you want to book profit in the coming months, this name should be on your radar. So, let’s take a look at two of its key drivers.

AMD Stock and the Xilinx Merger

The first driver behind AMD stock has to do with Xilinx (NASDAQ:XLNX). The company announced a merger with XLNX in October, planning to acquire it for $35 billion.

That combination will create a top computing entity and will all-around enhance AMD’s portfolio. Xilinx is a leader in programmable logic devices (PLDs) and will give AMD access to a diverse set of customers. With this acquisition, the company will also be able to include these devices into its portfolio. 

Those PLDs are central components to various products that target different markets, like telecom for example. As such, AMD will get a chance to tap into markets that lie outside its traditional range. That can give Advanced Micro a bit a of a cushion, too — in a post-pandemic world, if the demand for PCs and servers decline, the company will have a new market to target. All in all, both the businesses complement each other and the merge gives competitors like Intel (NASDAQ:INTC) a lot to worry about.

Deals like the AMD-Xilinx merger usually take time to close because of regulatory approval, but there have been no big hurdles so far. So, if AMD manages to integrate the businesses and market Xilinx’s products well, it could hit new revenue highs. Of course, that’s great news for investors. 

A Strong Hold of the Gaming Industry

Last month, I talked about this company’s extensive lineup of products that will continue to drive growth. I am bullish on AMD stock because of that technological edge. More specifically, AMD continues to enjoy a strong hold of the gaming industry.

Advanced Micro Devices supplies chips for both Microsoft’s (NASDAQ:MSFT) and Sony’s (NYSE:SNE) gaming consoles. To that end, both of those companies claim that their recent next-gen console launches this year have been their biggest ever. So, AMD has experienced unprecedented demand recently because of the gaming industry. This momentum is also expected to continue in the second half of 2021.

Back in late January, Rosenblatt Securities had a buy rating for the stock and raised its price target from $120 to $135. Rosenblatt also cited a “new server product” that will help the company double in size in the coming years. Further, at CNN Business, 29 analysts have given AMD stock a median price target of $110. That’s a nearly 30% upside from its current price.

Bottom Line

By now, it should be evident that investors have nothing to worry about with AMD stock. This name is only going upward and it will hit triple digits soon. The company has even outshined Intel.

On top of that, the demand for AMD’s products should be consistent and strong over the next decade. The company beat analyst estimates in its last earnings report and is expected to do the same next quarter. Considering everything, this pick is well-priced and will generate solid returns in 2021.

So, investors shouldn’t ignore this opportunity to invest in AMD before it hits a new high. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.


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