Advanced Micro Devices, Inc. (NASDAQ:AMD) has been on the move this week following the unveiling of its next-generation server chips. AMD stock is up 8% today alone, putting its week-to-date gains at just about 20%!
The new Epyc line of chips is said to offer higher performance at lower prices, and several big-name companies — including Microsoft Corporation (NASDAQ:MSFT), Dropbox and Baidu Inc (ADR) (NASDAQ:BIDU) — are expected to use them in their data centers.
A number of research analysts have raised their price targets on AMD stock based on the anticipated success of the new products. As a result, shares climbed as much as 8.4% on Wednesday to a new seven-week high.
What makes the launch of the new server processor so noteworthy is the fact that Intel Corporation (NASDAQ:INTC) has dominated the data center semiconductor space for years. The company currently owns approximately 98% of the market and has never had any real competition.
AMD’s introduction of Epyc is a game changer and should be welcomed by everyone but Intel.
Because customers have never before had the option to look at a competitor of Intel when negotiating prices, it is estimated that Advanced Micro Devices will be able to pick up market share quickly. In fact, one analyst expects Epyc to capture up to 7% of the total server market by the end of 2018.
Technically, the stock is attempting to break out on the back of the bullish news. A big volume rally on Tuesday pushed Advanced Micro Devices to resistance between $13 and $13.25 (the black line), and another gap up today has it trading just above the resistance range on heavy volume.
However, the real test will play out over the next week. If AMD stock is able to break through the ceiling, that should be enough to garner more buyers and continue the current rally. On the other hand, if it fails to hold above $13.25, it will be troubling sign for the near-term.
I’m shying away for now but am watching closely for confirmation of the move through resistance. At that point, I would be willing to change my view and consider AMD stock a buy once again.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.