After the huge gains by Advanced Micro Devices (NASDAQ:AMD) shares in 2019 and 2020, what to make of 2021? At this point, AMD stock is down roughly 10% since the start of the year. Is this downward trend in one of the hottest tech stocks of the past two years going to continue?
I don’t think AMD is out of steam. It may take it a bit yet to recover, and I doubt we’ll see a repeat of the 150% gains that made it the top-performing stock in the S&P 500 in 2019. But I do think the slump in AMD stock will end, followed by a return to growth in 2021.
AMD’s Ryzen Mobile Processors Are Making Waves
One of the keys to AMD’s 2021 is going to be the Ryzen 5000 mobile processors the company unveiled at this year’s Consumer Electronics Show.
The company has spent the past few years gaining market share in desktop PC processors. That’s been a big part of the AMD stock story over the past several years. 2021 is shaping up to be the year where Advanced Micro Devices makes big gains in laptops. At CES 2021, AMD announced that there were already 150 laptops signed up to have AMD Ryzen processors this year.
At the end of January, the first reviews of the new AMD mobile processors began to arrive. And they were good news for AMD and its investors. PCWorld’s take was typical of what’s being published: “AMD’s Zen 3-based Ryzen 5000 chips put the screws to Core i7 laptops.”
Those Ryzen 5000 mobile chips are winning converts and already selling like hotcakes. Having 150 laptops signed to use them in January — before benchmark testing — was a coup. Given the media and consumer reaction to the chips, expect them to be powering a lot more laptops than that this year.
The PC Market Could See Another Growth Year
The past decade was not great in terms of PC sales. With the popularity of smartphones came a slide in PC sales. After years of declining sales, the market was just showing signs of modest growth in 2019. Then the coronavirus pandemic hit.
At first the effect was to slam PC sales. With supply chains disrupted, the first quarter of 2020 saw PC sales drop by 12.3%. That was the biggest quarterly drop since 2013. However, the demand for PCs — especially laptops — as people worked from home and students adopted remote learning led to a surge in demand. Globally, PC sales ended 2021 up. Way up. Counts vary, but market research companies peg the increase at anywhere from 4.8% to 13%. Whatever the final tally, it’s agreed that 2020 was the biggest year for PC sales in a decade.
Once again, the various market research groups have wildly varying estimates for 2021. However, many see at least modest growth for PC sales. And as I pointed out last week, Advanced Micro Devices is going to benefit from that. The big demand for PCs has been in laptops, and 2021 is the year where AMD mobile processors are breaking into the laptop market in a big way.
Bottom Line on AMD Stock
I’ll be the first to admit that 2021 hasn’t gone according to script for AMD stock.
Despite a huge showing at CES 2021 in January, a who’s who of PC makers lining up to release laptops equipped with AMD Ryzen mobile processors, blockbuster sales of next-gen video game consoles featuring custom AMD silicon, and a record-setting fourth quarter that blew past Wall Street estimates, AMD stock is still down so far in 2021.
However, the stumbling start to the year hasn’t scared off analysts. Checking in with CNN Money, AMD remains a consensus “buy.” In fact, among the 35 investment analysts that CNN Money has been tracking, the distribution of AMD recommendations between buy and hold has barely shifted since last December, when AMD stock was at all-time highs. Even now, their median $110 price target shows confidence that AMD will recover and go on to hit new highs.
Count me among the bulls who think that the first two months of 2021 are not indicative of where AMD shares are headed. I doubt we’ll see a repeat of 2019 and 2020 growth surges, but Advanced Micro Devices is in a solid position. And AMD stock seems likely to return to a growth trajectory sooner rather than later.
On the date of publication, Louis Navellier had a long position in AMD. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.