AMD’s stock rally in the first three quarters of 2018
Advanced Micro Devices (AMD) stock has been the strongest semiconductor stock this year, rising as much as 210.9%. This growth came on the back of Intel’s (INTC) headwinds. Investors became optimistic about AMD as Intel delayed its 10nm (nanometer) PC products to the end of 2019 while AMD maintained its roadmap to launch 7nm server products in early 2019. To add to this, Intel faced supply constraints for 14nm CPUs (central processing units).
On the other hand, AMD stated that it is on track to achieve a mid-single digit percentage share by year-end of the server CPU market, which Intel has dominated with a ~99% share. AMD also hopes to achieve a double-digit percentage share of the server CPU market in 2019 with the help of its 7nm server CPUs. AMD’s stock rally was largely due to the company’s strength in the CPU market.
AMD stock falls in the fourth quarter
However, AMD stock slid in the October sell-off of the stock market, and fell further after its third-quarter earnings were impacted by the GPU (graphics processing unit) market weakening because of the crypto bubble burst. AMD was the biggest beneficiary of the crypto boom as miners preferred its GPUs to solve complex math problems and earn digital currency.
Although AMD expected crypto sales to slide in the third quarter, they fell more than expected as the channel inventory rose to unexpected levels. AMD stock was further hit in November when rival NVIDIA (NVDA) reported weak third-quarter GPU sales and guidance.
AMD stock is very reactive to noise. The rally caused by CPU strength was partially offset by declines due to GPU weakness. Despite these declines, AMD stock has grown by 76.5% year-to-date, indicating that overall investor sentiment is now more positive than at the start of the year. In this series, we’ll look at how AMD’s CPU and GPU business could impact its earnings in the fourth quarter and next year.
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