Should You Buy Advanced Micro Devices Stock After Thursday’s Big Drop?

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  • Advanced Micro Devices (AMD) stock plummeted on Mar. 31, dropping 5.8% on the day
  • The catalyst for the drop was a downgrade from Barclays
  • Long-term growth investors should take this opportunity to buy AMD stock at a discount
amd stock

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Advanced Micro Devices (NASDAQ:AMD) shares were on the move to end March. After a two-week rally, AMD stock capped the month off with a small drop on Mar. 30. This was followed by a 5.8% drop on Mar. 31. The slide continued on Friday morning. Not great news for Advanced Micro Devices shareholders, obviously, but a steep drop like this offers an opportunity to investors. 

The question is, should you buy AMD stock at this point? Shares are now down over 24% so far in 2022. They are off the all-time high close in November 2021 of $161.91 by nearly a third. The analyst who downgraded the stock raised concerns that AMD could experience challenges in 2023, which raises questions about whether this downward trajectory will continue.

While some investment analysts are hitting pause on AMD stock for the moment, I see this as a buying opportunity. Here is the case for taking advantage of AMD’s weakness to add shares to your portfolio.

AMD Advanced Micro Devices $109.26

Why Did AMD Stock Drop on March 31?

The trouble started immediately for AMD stock, with shares slipping from the moment the opening bell sounded. The catalyst for the drop was a downgrade from Blayne Curtis, an analyst with Barclays. In a research note to investors, Curtis downgraded AMD’s rating to “equal rate” from “overweight.” Curtis also slashed his price target from $148 to $115.

What has Curtis so concerned about Advanced Micro Devices? As reported by The Street, Curtis noted that several of AMD’s key segments — gaming, PC, and its recent Xilinx acquisition — are running at “elevated levels.” The danger is that a cyclical correction is coming to these hot markets. In addition, he feels that AMD is facing increased competition from other semiconductor manufacturers, including Intel (NASDAQ:INTC).

He sees the two issues converging in 2023, resulting in further weakness for AMD stock.  

AMD Fears Are Overblown

Let’s unpack the issues here. 

Xilinx reported its last quarterly earnings before being acquired by AMD on Jan. 26. The company’s fiscal third quarter saw record revenue, up 26% year-over-year. Much of that growth was driven by big gains in Xilinx’s data center, automotive, and aerospace & defense divisions. Data center spending is projected to keep going at a strong pace through at least 2026. With the Russian invasion of Ukraine, defense spending is set to be increased. Despite challenges over the past year, global spending on automotive chips is projected to rise at a CAGR of over 6% through 2027.

I don’t see anything in there that is cause for concern. In fact, this data points toward continued growth for Xilinx.

But what about AMD’s gaming and PC business? There is no denying that AMD has benefited from several factors that could see cyclical decline going forward. The pandemic resulted in more people gaming. Additionally, the remote work trend turned the declining PC market into one unexpectedly experiencing hot growth. A new generation of game consoles have been in high demand and they’re powered by custom AMD chips.

By next year, there could be some cooling in all these areas. But maybe not. Remote work may be fading, but hybrid work — partly at home and partly in the office — is becoming a new normal. That is expected to keep PC sales humming. The PlayStation 5 and Xbox Series X are still early in their life cycles. There is no sign of demand letting up. 

As for competition from the likes of Intel, these are early days for Intel’s ventures into computer graphic processing units (GPUs). At the moment, the company has few takers and is just ramping up desktop GPU production with limited edition releases this summer. Convincing PC manufacturers and consumers to adopt a GPU from a new company instead of the brands that have dominated the market for decades will be a tough sell for Intel. The company also has to convince game developers and others to optimize software to run on its GPUs if it is going to see any uptake.

Yes, this is a risk to AMD stock. But for now, it is more something to keep an eye on than a cause for alarm.

Bottom Line: Should You Buy AMD Stock?

AMD is a Portfolio Grader “B” rated stock. It still earns a consensus “Overweight” rating from investment analysts tracked by the Wall Street Journal — despite the recent Barclay’s downgrade. Their average price target of $152.50 offers nearly 40% upside from today’s price. 

The latest drop in AMD stock is just another opportunity for long-term growth investors to add more shares to their 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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