Is the Ryzen Disappointment Another reason to book profits in AMD stock?
Shares of Sunnyvale, California-based, Advanced Micro Devices, Inc. (NASDAQ:AMD) plunged more than 7% after the Ryzen CPU reviews did not live up to initial hype. Some investors might have been tempted to book profits after not so positive Ryzen reviews were out, especially the ones who might have been sitting on nearly 600% gains. Has the Ryzen disappointment given one more reason to book profits in AMD stock? Well, one would be tempted to book profits now, as AMD stock has been on a terrific run gaining 22.57% YTD, breaching its 10-year high price recently after its massive gains in the last twelve months (more than 600%). However, investors should give a second thought as it could be too early to bet against AMD stock. Here's why.
AMD Will Still Gain From Ryzen.
No doubt, in principle all reviews state that Ryzen CPUs don't knock of Intel's (NASDAQ:INTC) high-end offerings in certain aspects, especially gaming. And Investors and enthusiasts would be disappointed as Ryzen was promoted as a gamers and enthusiasts dream. However, as an SKYMTL – HardwareCanucks review puts it "For an immature platform still in its infancy, Summit Ridge, and by extension Ryzen is a remarkably well-rounded solution and like any fine wine, it will only get better with age." AMD has definitely put Intel on notice but does not blow away Intel as expected initially. Mark Walton of Ars Technica in his review states that "The Ryzen 7 1800X, then, is a tale of two chips. One is a disruptive, market-changing, eight-core workstation powerhouse; the other is a competent, if wholly unsatisfying gaming CPU. Intel has certainly been given a kick—I’m just not sure it was hard enough."
The first part of the above statement is crucial as a Market Realist post highlights "even modest share gains in the market" could significantly increase AMD’s revenue. And AMD is most likely to gain PC market share from Intel with Ryzen CPUs as they are disruptive in certain aspects. Also, AMD does hold an advantage over Intel and NVIDIA (NASDAQ:NVDA) in the APU space as the above research points out:
"While AMD can compete with the latter two in the CPU and GPU space, they cannot compete with AMD in the high-end APU (application processing unit) space. AMD has the best of high-end CPUs and GPUs and has the ability to create an APU by integrating its CPU and GPU. AMD has a monopoly in the APU market, and with the changing needs, the demand for APU should increase."
With Ryzen being on par with Intel's processors on most fronts and the all new Vega GPU's to be launched, AMD should further extend its dominance in this space.
AMD Still Has Other Growth Drivers.
With almost all reviews suggesting Ryzen to be a great workstation chip, it increases the expectations from the Naples Server CPUs to be launched in the second half of the year. A fellow Amigobulls contributor had already covered in an earlier post how Ryzen could help AMD break Intel's near monopoly in servers. This is a likely future growth driver for AMD stock as Ryzen CPUs do well on most fronts except the gaming segment. With Datacenter market expected to increase rapidly in size over the next 5 years, as highlighted in the above post, Zen based Naples Server CPU should help AMD mount a strong challenge to Intel here. The Ryzen 6 & 4 Core CPUs which are coming in Q2 2017 should also boost AMD's market share in the PC market going forward since the high-end chips have shown enough promise, though they lag in certain aspects.
As a Wccftech post states, AMD's RX Vega GPU could be launched between May 30th & June 3rd. Though the full details of Vega are not yet out, it should give a good fight to NVIDIA's recently launched GeForce GTX 1080 Ti GPU. GeForce GTX 1080 Ti is priced at $699, much less than its previous best offering Titan X, which was priced at $1200. The aggressive pricing of GeForce GTX 1080 Ti, which is NVIDIA's best GPU till date, does indicate that Vega would be very competitive. Initial demos show Vega outperforming the GTX 1080 by approximately 10%. The final product could be much more refined and one could expect AMD to certainly do so after the Ryzen gaffe. Vega launch is yet another catalyst for AMD stock.
It is sure that Ryzen reviews have dampened the optimism around AMD stock for now. Investors should also look at AMD's technical chart. The stock recently hit the upper Bollinger Band, which indicated that AMD stock was in for a correction. Still, AMD has enough product launches coming up, which could boost investor sentiment and also has other growth factors going for it. It would be too early to book profits in AMD stock for now as in course of time, as our coverage has highlighted, AMD stock still has more upside left. Long-term investors should stay put on AMD stock and use any dip in price to buy even more shares.
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