I’ve written quite a bit about Advanced Micro Devices (NASDAQ: AMD) in the past. (Previous articles available here.) Naturally, after not having written anything about the action in the last half year, I was asked if my previous thoughts still held.
I think that at the moment the main developments with this company are twofold. First, Apple (AAPL) moves away from its dependence on Intel (INTC) and AMD chips. The second is AMD’s recent superiority over Intel in terms of performance.
Apple’s problem is clearly beneficial to Apple, but it does more harm to Intel than to AMD. Producing its own chips eliminates Apple’s bite of profit margins because it no longer has to pay for externally manufactured chips. Additionally, the transition to ARM processors makes sense for the company’s core customer base.
ARM chips will reduce the performance of new MacBooks relative to x86 in exchange for increased power and reduced size. While Apple has its share of power users, most of its base consists of light users. For them, thinner MacBooks that have longer battery life are probably more desirable than MacBooks with processing power that will never see real use.
In the war between Intel and AMD, only recently did AMD get ahead. It is showing new skills in chip design, and in fact markets updated performance increases from chip design to where AMD is the clear winner in the gaming console and laptop industries. Combining this fact with Apple’s migration away from its dependence on external chip makers, we now have an environment where competition will be more extreme outside of the Apple market: non-Apple users become the only market for the These two chip companies can compete, which means that winning a contract with Apple to save its skin is no longer an option for the company.
Therefore, Apple’s ARM adaptation is likely to be beneficial, not detrimental, to AMD. AMD now has a real chance of taking Intel off the market. Also, at AMD’s current progress rate, it is highly likely that it can win over those advanced Apple users.
In short, Apple’s recent intention to go all in with ARM makes AMD’s game almost purely a performance game. If the non-Apple market is the top market for performance and if AMD is the top chipmaker in the non-Apple market, which is the case today, then AMD just needs to focus on staying as the performance leader for Earning a lot of what can only be described as a perfect storm for AMD’s superiority.
AMD could even go back to Apple laptops (for example, MacBook professionals for advanced users) once it establishes itself as the clear performance leader. Intel probably won’t have that opportunity in the near future, as Apple can already create chips that outperform Intel in terms of performance-by-power. From a company size perspective, this is quite impressive as AMD is much smaller than Intel, but capable of consistently outperforming Intel’s design.
As a former seller, I like both Apple’s and AMD’s recent actions. They seem focused on their respective markets. Apple wants to design chips that allow for greater comfort and convenience (longer battery life and more compact laptops), while AMD is focused on providing the best performance (top-of-the-line GPU for gaming and CPU for laptops).
See AMD’s success with the Ryzen 4800H. The company’s ability to gain superiority over a larger, better-funded, and more established Intel has strong implications for the future of both companies. Perhaps AMD is getting bigger than Intel and can finance its own dedicated manufacturing teams (AMD currently has no fable).
AMD is already playing big, having won contracts with Sony (SNE) and Microsoft (MSFT) to produce CPUs and GPUs (marked APU, as AMD combines the CPU and GPUs on a single integrated circuit) for PlayStation 5 and Xbox Series X, respectively. Meanwhile, Intel is losing its grip on the market. In fact, Apple’s decision to create its own chips could be a response to its previous reliance on Intel chips, which were underperforming relative to AMD: Lack of real performance improvements from Apple’s latest MacBooks could Take advantage of this as an opportunity to stop relying on Intel and third-party designers as a whole and to further consolidate your consolidation of creating laptops specifically for your core audience.
In any case, Apple’s recent decision is one of the most important in the chip markets and is likely to be beneficial to both Apple and AMD. The decision is certainly an obstacle for Intel. In conclusion, in response to the question about AMD, I am very pro-AMD.
However, I am not recommending a purchase at this time. And it’s not AMD’s fault: The technological rebound in the market has pushed valuations too high. While AMD is certainly worth $ 55.88 a share (as of writing, July 12) when considering its future prospects, the tech market is almost certain to regress, allowing you to buy at lower prices.
I think AMD’s share direction is on the rise, but not without a significant pullback in the tech market dragging it into better buying opportunities. Similarly, those looking to make a profit with AMD don’t need to panic, as AMD will certainly be above $ 55.88 in the near future. I think AMD’s price is around where it should be, but in a market that is too high, and therefore I am neutral regarding AMD’s current valuation.
Happy trade
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