Wait for Intel To Chip Away Market Share Before Buying Amd Stock

Investors are finally bearish on Advanced Micro Devices (NASDAQ:AMD) stock. After a fairytale run in the last few years, shares are losing steam. However, several catalysts can bring it back to life. The contrasting starts of Intel (NASDAQ:INTC) and AMD illustrate that there is no one-size-fits-all approach to investing.

Advanced Micro Devices (AMD) logo on blue background with Ryzen and Radeon brands
Source: Joseph GTK / Shutterstock.com

Growth stocks are having a tough time of it in the new year. But AMD’s outlook for the coming quarter might provide some relief to worried investors. The company will report its fourth-quarter results in about two weeks. And it will be intriguing if there are enough good news items in the earnings report to arrest the stock’s decline.

The company expects a major boost from the increased demand for graphics cards, gaming consoles, and data center segments. Over the last five years, the company has built up an enviable position in its core markets. It has taken away substantial market share from Intel in the processors market. At the same time, it is expanding into new areas to diversify revenues. All of this is leading to significant shareholder interest.

But now Intel is fighting back. It is a company with an aggressive product roadmap and massive capital spending. This makes it the perfect bet for investors looking to buy tech stocks that have long-term potential at affordable prices, which also happens to be what Intel has in store. The company’s new line of processors is doing exceptionally well. And their upcoming chips are even faster. That will lead to a better valuation for AMD. Something value investors have been waiting for.

AMD’s Operating Metrics Are Great

AMD’s revenue comes from two reportable segments. The first one includes sales on their consumer GPU and CPU product families, accounting for almost 56% in the last quarter alone. Since introducing its highly successful Ryzen microprocessor, this segment has performed exceptionally well. The Ryzen microprocessor was a revolutionary design that overcame many obstacles to become one of today’s market’s fastest and most affordable processors.

The chipmaker’s second reportable segment, namely Enterprise and Semi-Custom division, accounted for 44% of its sales last quarter. This includes EPYC server SKUs and custom chips built specifically to meet the demands in gaming consoles or other specialized applications. The recent performance of the company’s business has been impressive, with no signs of cyclicality.

The gaming console market is projected to continue growing this year. The new season is starting to bring some exciting changes, with sales for Sony’s (NYSE:SONY) PlayStation 5 and Microsoft’s (NASDAQ:MSFT) Xbox Series X/S consoles growing exponentially this year. Both of these top-of-the-line gaming consoles use AMD chips to power their operation. And both have been, for the most part, out of stock in throughout 2021. This indicates that there is strong customer demand as it pertains to these devices.

The data center market is a great opportunity for AMD this year. Analysts are forecasting AMD’s share of the server market is projected to grow by 25% this year, which would be an excellent opportunity for AMD’s top-line given their impressive share of the lucrative industry. The growth could also give them more leverage when competing against Intel, the dominant company in this segment.

Intel Is Finally Competing Well With AMD Stock

Intel’s Alder Lake processors are a game-changer, helping it regain a significant chunk of lost market share. These new CPUs are reportedly 30% faster than their AMD counterparts and sport affordable prices. This has caused AMD to reduce the cost of its Ryzen processor line. But Intel still prices aggressively compared to peers.

Intel is also breaking new ground by releasing a range of processors designed to power laptops and desktops alike. These 60 Alder Lake Series CPUs will be featured in hundreds of different computer models, all coming out this year alone. Intel is going to get back at AMD in a big way. The new Arc GPU has been getting a lot of attention, with Intel reporting more than 50 design wins. Intel is getting ready to take away market share from AMD in the graphics card space because their technology is just as good, if not superior than competitors.

Meanwhile, AMD’s recent notebook processors power some of the fastest laptops on earth. AMD has finally introduced their new Ryzen 6000 CPUs for laptops at CES 2022, which is powered by the company’s upgraded Zen 3 Plus architecture. This latest model features a 6 nm process node and comes with RDNA 2 graphics architecture.

Intel’s stock has been on a surprising start this year, up despite the turmoil in technology. Wall Street is betting that Intel will turn things around and recover its former glory days as one of America’s leaders in semiconductors production once again. Intel’s latest offerings in the Alder Lake lineup take on AMD and provide more than enough power for gamers. So, there is the reason for this optimism.

However, do not expect AMD to give Intel a walkover.

Expect Big Things From AMD in 2022

The year 2022 is shaping up to be one of the most interesting for laptops as both AMD and Intel announced full slates at CES that will likely power almost any major computer released this season. This year’s Ryzen 6000 chips use a slightly upgraded architecture from last year’s 5000 series. The new Ryzen 7 5800X3D is coming soon to take on Intel’s current leading chip, the i7 8700K, with its chips set to outpace the Ryzen 5900X by 15%.

AMD’s new Ryzen 7000 Series chips will be the first of their kind to use a 5nm process and ship with an updated socket. They are also set for release later in 2022, though there’s going to be quite some time before they reach stores since they’re using AMD’s new Zen 4 architecture.

The fight between Intel and AMD over whose processors offer better performance has been reignited with the release of their newest chip, Alder Lake. This new processor from Intel shuts down competitors at an excellent price point.

Nonetheless, expect things to get better for AMD as the year progresses.

Let AMD Stock Lose More Steam

There are many ups and downs for this industry-leading manufacturer. But they’ve still managed to grow their market share significantly with new releases. Intel has finally hit back, and their investors are rejoicing. Along the way, it has taken the shine off AMD stock. And that’s a good thing.

Great tech stocks are rarely available at a discount. After a very long time, AMD stock is available at somewhat of a discount. That’s not to say this is a value stock. By all means, this is an expensive company. However, it can grow into its valuation.

Therefore, it’s the best time to buy this one.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.


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