AMD stock underperforms market
The semiconductor industry saw a strong rally in 2017, with the VanEck Vectors Semiconductor ETF (SMH) rising 40% and outperforming the S&P 500 Index (SPX-INDEX), which rose 21.8%.
Though the entire industry and the market were strong, Advanced Micro Devices (AMD) stock fell 9.4% even though it turned from losses to profits in 2017. Its stock had already risen 300% in 2016 and had priced in more earnings growth than it reported in 2017.
2017: A turnaround year for AMD
Three years back, AMD was barely competitive with Intel (INTC) in the high-end PC (personal computer) CPU (central processing unit) market, and it lost a large amount of GPU (graphics processing unit) market share to NVIDIA (NVDA). However, AMD was a different company in 2017. It launched Ryzen CPUs and Vega GPUs, putting itself back into the high-end CPU and GPU markets and competing head-to-head with Intel and NVIDIA. This saw AMD’s 2017 revenue grow 25% YoY (year-over-year) and its operating profit turn from negative to positive.
Apart from new products, AMD benefited from a strong market environment. The company witnessed the cryptocurrency boom, which saw crypto miners buy its GPUs to mine currency. The company also benefited from slowing declines in PC sales and the rising popularity of PC gaming.
There was strong demand for CPUs and GPUs in the cloud and data center spaces, which boosted NVIDIA’s and Intel’s data center sales. Even AMD benefited from this trend as its EPYC server CPUs were adopted by cloud giants Microsoft Azure and Baidu.
AMD’s 2018 goals
As AMD entered 2018, it announced plans to launch a second-generation Ryzen CPU range throughout the year. It also plans to ramp up production of its Ryzen Mobile APUs (application processing unit), Ryzen Pro, and EPYC CPUs.
In 2018, the company will focus on bringing its CPUs and GPUs inside every PC and laptop by expanding its relations with OEMs (original equipment manufacturer). It will look to improve its overall ASP (average selling price) and profit margin by targeting high-end PC and server markets. In 2018, AMD aims to achieve a double-digit share in the server CPU market, which is currently dominated by Intel with a 99% market share.
In this series, we’ll see what AMD investors should expect from the company in 2018.