AMD: Difficult To Go Wrong With Rock-Solid Execution

AMD

The Stock Of Advanced Micro Devices, Inc. (NASDAQ:AMD) Has Rebounded Significantly From Its July Lows As The Market Anticipated A Strong Q2 Report. However, After Soaring Through July, Its Post-Earnings Enthusiasm Has Slowed Slightly.

We Believe AMD’s Fundamental Characteristics, Good Execution, And Potential For Market Share Increase Bode Well For Its Medium-Term Re-Rating At Present Prices. Furthermore, Its Price Movement Has Most Likely Bottomed Out On Its Long-Term Chart As AMD Turns To Its Data Center And Embedded Divisions To Continue Quickly Gaining Share. As A Result, We Are Sure That The Increased AMD Purchasing Emotions Signal A Re-Rating, Which Should Raise Buying Momentum Even Higher.

Nonetheless, Given Its Fast Rise From July Lows, We Believe AMD Will Experience Near-Term Negative Volatility. As A Result, Investors Might Consider Waiting For A Dip Before Increasing Their Holdings. As A Consequence, We Continue Our Buy Recommendation For AMD.

AMD’s Diversified Business Helps Overcome Consumer Headwinds

AMD Has Been Buffeted By Recent Consumer Spending Headwinds, Worsened By Worsening Macroeconomic Conditions. As A Result, Management Reduced Its Q3 PC Forecast From The High Single Digits To The Mid-Teens, As Discrete Graphics Again Underperformed. Nonetheless, AMD Outperformed Intel In The Data Center And Embedded Areas, Gaining Market Share (INTC). In The Discrete GPU Category, NVIDIA (NVDA) Faces Significant Headwinds. Despite The Fact That NVIDIA Acknowledged Its Issues In A Preliminary Q2 Announcement In Early August, The Problems Might Plague The Company For The Duration Of H2’22. In August, A DIGITIMES Investigation Was Noted.

Taiwan’s Leading Graphic Card Suppliers Expect 2022 Shipments To Fall 40-50% Yearly Due To A Dramatic Drop In Demand For Crypto Mining Applications, With Prices Also Falling. As A Result, According To The Sources, Nvidia’s Revenues For The Second Half Of 2022 And The Entire Year Are Expected To Plummet At An Unprecedented Rate.

Notably, Omdia’s Preliminary Assessment Revealed AMD Maintained Its Server Market Share Increases, Reaching 22.7% In Q2. In Contrast, Intel’s Server Market Share Fell 69.5% In Q2 From 72.7% In Q1 As AMD, And Arm Architecture CPUs Gained Momentum. As A Result, AMD’s Ability To Maintain Share Gains Versus Intel Is A Good Hedge Against Consumer Headwinds, Helping To Support Its Valuations.

AMD’s Continued Gains In The Data Center And Embedded Segments Should Help Minimize The Issues Encountered In The Client And Gaming Segments (Mainly Its Discrete GPU). Furthermore, AMD’s Projection Appears Reasonably Conservative, And Dr. Su Emphasized That Its Estimations Have De-Risked The PC Sector’s Headwinds. Nonetheless, We Believe Management Is On Top Of The Problem And Recommend Investors Stay The Course, As AMD Should Emerge More Robust.

AMD’s Price Action Suggests Near-Term Consolidation

As We Predicted In Our Prior Post, AMD Made Its July Lows At Its Intermediate Support Of $70. We Believe AMD Has Reached Its Medium-Term Bottom, Consistent With Our Estimate Of The Market’s Medium-Term Bottoming Process.

However, The Rapid Increase From Its July Lows Has Taken Us By Surprise. Furthermore, AMD’s Post-Earnings Purchasing Momentum Has Slowed, Implying That The Market Had Anticipated A Solid Card Pre-Earnings, Contributing To The Swift Rebound.

Given AMD’s Overbought Breadth And Momentum Indicators, We Believe A Near-Term Pullback Is Increasingly Plausible As The Market Digests The Positive Momentum From Its July Lows. As A Result, Investors Might Consider Investing More Aggressively When The Market Has Its Next Significant Drop.

Is AMD Stock A Buy, Sell, Or Hold?

We Reaffirm Our Buy Recommendation For AMD.

We Have Re-Rated AMD, Needing Lower Free Cash Flow Yields Since We Believe The Market Has Improved Its Purchasing Attitude. Combined With The Company’s Outstanding Execution And Visibility Of Market Share Growth, We Encourage Investors To Leverage Possible Negative Volatility To Increase Exposure Since AMD Is Not Costly.

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About the author: Adewumi is an expert financial writer and crypto enthusiast with more than 2 years' experience in writing crypto news and investment analysis. When not writing or reading about crypto and finance, Adewumi spends his time watching football and visiting museums and art galleries.