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What Drove AMD’s Stock in 2016?

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AMD stock has risen 310% in the last year

Advanced Micro Devices (AMD) stock rose 8.6% in the last week and 32% in the trailing-one-month period. In the trailing-12-month period, shares have risen by a significant 310% to $11.58. AMD announced its 3Q16 results in October 2016 and reported double-digit revenue growth for the first time in more than two years. It also reported its first non-GAAP (generally accepted accounting principles) net profit in six quarters. The growth was driven by strong demand for semi-custom chips and its revolutionary Polaris GPU.

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In 2014 and 2015, AMD’s revenue took a downward path as it lost discrete GPU market share to NVIDIA (NVDA) and PC processor market share to Intel (INTC). In 2016, AMD aims to regain the market share it lost to NVIDIA by targeting mainstream customers. It has so far succeeded in increasing its share from 21% in 4Q15 to 30% in 2Q16, according to Jon Peddie Research.

Increased sales of semi-custom chips

The seasonal demand for semi-custom chips was fueled by orders from Sony (SNE) and Microsoft (MSFT) for their game consoles. Despite strong earnings, AMD’s stock fell 6.3% a day after the earnings release, as the company reported weaker guidance for fiscal 4Q16. The company expects fiscal 4Q16 revenue to fall 18% sequentially as the seasonal demand for semi-custom chips fades.

As the seasonal effect fades in fiscal 4Q16, the company expects revenue to fall sequentially. However, it expects profit margins to improve in fiscal 4Q16 as it realizes licensing gains and improves operational efficiency.

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