AMD stock continues to outperform the industry
Advanced Micro Devices (AMD) has been swimming against the current on the back of its strong product implementation. In 2018, AMD stock rose 80%, while the VanEck Vectors Semiconductor ETF (SMH) fell 10.8%. Semiconductor stocks recovered slightly in January 2019 due to the anticipation of strong demand in the second half of the year. AMD rose 24% YTD, outperforming the SMH, which rose 12.4%.
A week that was
The majority of this 24% growth came in the last week of January when AMD’s stock rose 21%. Last week, AMD’s stock moved in the opposite direction to that of its rivals Intel (INTC) and NVIDIA (NVDA). AMD’s stock fell 12% in the first two days of the week as Intel and NVIDIA projected a weak demand environment in the data center and graphics market owing to the US-China trade war.
AMD stock rose 20% on the third day of the week after the company reported stronger fourth-quarter 2018 earnings and full-year 2019 guidance. The stock rose another 5.7% on the fourth day of the week after Intel named its CFO and interim CEO Bob Swan as permanent CEO, whereas Intel’s stock fell 1%. Investors’ reaction shows that they believe Bob Swan’s lack of technical experience will give AMD an opportunity to be more competitive in the server CPU (central processing unit) space and gain market share.
Justifying the 20% jump
Some analysts argued that AMD’s 20% jump was an overreaction by investors, as the company’s fourth-quarter 2018 earnings missed analysts’ estimates by $20 million. Half of this 20% growth was a rebound from the stock price decline that was triggered by NVIDIA’s revised guidance, which lowered its fiscal 2019 fourth-quarter revenue estimate by $500 million. Relative to NVIDIA, AMD’s revenue miss is minuscule.
AMD expects a steeper earnings decline than Intel in the first quarter of 2019, but the former’s full-year 2019 revenue guidance of high-single-digit growth beats Intel’s guidance of just 1% growth. AMD is set to grow in 2019 by gaining market share from Intel and NVIDIA in the data center space.
In this series, we’ll look at AMD’s growth drivers for 2018 and 2019.
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