Investors have been able to count on Advanced Micro Devices, Inc. (NASDAQ:AMD) for impressive returns over the past four years. Since 2018, AMD stock has been on a high growth trajectory, up 1,237%. However, starting last November, that growth has sputtered.
In fact AMD shares are currently down 15% from their November, 2021 high close. I think there’s still plenty of fuel in the AMD tank, and the latest news about the global PC industry re-enforces my position.
If you can pick up shares in this Portfolio Grader “B” rated semiconductor stock at its current discount, your portfolio will be better for it. Here’s the latest news about global computer sales and why it spells good news for AMD stock.
Worldwide PC Shipments “Soared” in 2021
Advanced Micro Devices sells chips that are used in a wide range of applications. This includes enterprise silicon — a high growth sector thanks to the demand for servers.
The company designs custom SoCs (system-on chip), which you’ll find in the high-demand Xbox One S/X and Playstation 5 game consoles. AMD also sells embedded processors. In its latest quarter, the revenue from these segments was up 69% year-over-year.
That’s what investors want to see, and the company’s success here is an important reason for AMD stock’s performance.
However, as well as the Enterprise, Embedded and Semi-Custom division has performed, its the Computing and Graphics division that’s responsible for the lion’s share of AMD revenue. In the last quarter, that was $2.4 billion or 56% of the total.
That makes a new report from Canalys good news for Advanced Micro Devices. According to data published by Canalys, global PC shipments “soared” to 341 million units in 2021. That’s 15% higher than 2020 — which was also a very good year for the industry.
It puts 2021 sales of laptops and desktop PCs at their highest level since 2012. That growth came despite ongoing supply chain challenges.
More good news. Canalys researchers noted that many of the purchases are net new rather than replacements for existing computers. This means the global PC base is expanding, making continued growth more likely. Canalys is projecting that 2022 PC sales will be even stronger.
With PC processors and graphics cards making up such a large chunk of AMD’s revenue, the Canalys numbers bode well for the return to growth of AMD stock.
AMD Continues to Make PC Gains
The overall growth of the PC market is a good thing for a company that sells CPUs. However, AMD is in the enviable position of also increasing its market share against rival Intel (NASDAQ:INTC).
Last November, it was reported that AMD had hit a total market share of 24.6% versus Intel’s 75.4%. That’s AMD’s highest showing since 2006. AMD has lagged slightly in laptop chips (it hit 22%), but at CES 2022 the company unveiled new Ryzen 6000 series mobile chips that took home Innovation awards.
Intel made headlines with its own new 12th generation Core mobile chips with hybrid architecture, but the reality is that Ryzen 6000 mobile processors are likely to increase AMD’s gains in the laptop market. Intel is finally showing signs of getting its act together, but at best this is expected to only slow AMD’s momentum.
With a growing market share in an expanding market, the formula is there for AMD stock growth.
AMD stock was the top performer for the S&P 500 in 2019 with a 150.2% return. It was an S&P 500 top eight performer in 2020, with a 99.8% return. 2021 wasn’t quite as good. With the slump that started in November, AMD stock finished the year with a 57% gain.
Let’s put that in perspective. I don’t know many investors who would complain about a 57% annual return on a low-risk stock. AMD is unlikely to repeat its 2019 or 2020 performance this year. 2021 may be a stretch as well. But with shares still down significantly from 2021 levels, its enterprise revenue surging, and PC sales expected to continue being red-hot in 2022. AMD stock is a pretty good option for a growth portfolio.
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.
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