AMD Stock: Advanced Micro Devices, Inc. Could Gain Big On Vega Launch

Advanced Micro Devices, Inc. could gain big with the launch of RX 500 GPUs on 18th April ahead of Vega GPU launch. AMD stock could head higher going into Vega GPU launch.

AMD Stock Advanced Micro Devices, Inc. Could Gain Big Going Into Vega Launch

Shares of Sunnyvale, California-based Advanced Micro Devices Inc (NASDAQ:AMD) have not yet recovered from the Goldman Sachs downgrade which tanked AMD stock in the first week of April. AMD stock is still down more than 12.5% this month. The recent launch of mid-market Ryzen 5 CPUs which had received overall positive reviews also did little to lift AMD stock. AMD stock seems to be caught in a bearish sentiment and may require some near-term catalysts to put AMD stock back on an upward trajectory. Apart from the earnings, Vega GPU launch is a near-term catalyst which could boost AMD stock in a big way. There was some inflow of positive news recently for the GPU market which bodes well for AMD's Vega GPU launch. AMD stock climbed almost 4% in yesterday's (April 17th) trade on positive comments from a research firm on GPU market outlook. AMD is likely to gain big with its GPU refresh lined up and Vega launch around the corner.

RX 500 series launch on 18th April could be a big boost to AMD ahead of Vega launch.

AMD stock's recent run had also taken a hit early this month, on account of Pacific Crest's research suggesting weak GPU outlook for AMD's rival NVIDIA (NASDAQ:NVDA). NVDA stock was also downgraded due to this reason. This news had not gone down well with AMD investors since AMD's flagship Vega GPU is scheduled for a launch this quarter. However, in total contrast to the above claim, there are some positive comments coming in recently, regarding the sales of GPUs from boutique research firm MScience. MScience analyst Mark Bachman in his recent interview stated that sales in North America are very strong for both AMD and NVIDIA. When asked about GPU weakness in near-term, he said that "we are not seeing that weakness in GPU pricing". He pointed out that all these observations are based on his firm's check on "receipt-level data" for the actual sales at retail to consumers which are bound to be more insightful and accurate than the usual supply chain channel checks. Bachman mentions that his data is only for North America and the data of Asia-Pacific, another significant gaming enthusiast market, would take some time to come.

Talking about AMD specifically, Bachman suggests that AMD's existing Polaris based 400 series GPU sales have rebounded, especially that of RX 480 and RX 470 cards. AMD is set to launch its refreshed Polaris based RX 500 cards today (April 18) ahead of the company's flagship Vega GPU, which is expected to be launched sometime in May. According to a Wccftech post, the RX 500 cards on an average offer 2X more performance than the lower level cards at competitive prices. The MScience analyst is highly optimistic about the latest GPU refresh by AMD and has placed his odds highly in favor of AMD with Vega GPU launch also lined up. If Bachman's research hold's true, AMD could make some significant gains in the mainstream segment before taking on NVIDIA in the high end of the market with Vega.

Vega release date may be drawing much closer.

To make it tough for AMD's Vega GPUs, in a surprising move, NVIDIA recently launched its most powerful, high-end GPU, Titan Xp at a price point of $1200. There have been numerous leaks till now about AMD's premium Vega GPUs. The latest leaks suggest that the Vega launch is just around the corner. There are some rumors that AMD might launch Vega during its Computex convention on May 30. The latest leaked video teaser suggests that AMD is all set to do a marketing blitz for the Vega GPUs. The Vega GPUs are reported to come with unique packaging design and a lot of goodies along with it. The latest leak also confirms some of the previous impressive leaked specs of Vega and the RX Vega limited edition “Reference” Liquid Cooling Design. We can expect much more leaks going ahead and could even see a much earlier release with NVIDIA mounting pressure on AMD with its launches.

Summing it up.

AMD stock may be in a rough patch presently but the upcoming product launches could be the much-needed catalyst for AMD stock to resume its upward march. The recent bearish commentary about AMD stock has made investors stay away from AMD stock. However, given the potential of upcoming product launches and taking a long-term view, AMD stock now could be a great bargain. As stated in our previous coverage, AMD need not necessarily outperform its rivals on every single parameter to benefit from its new launches. AMD just needs to be competitive keeping in mind the price to performance aspect. The latest positive commentary really bodes well for AMD stock and if the research findings were to hold true AMD could gain big going into its Vega launch.

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Sreekanth Anasa Sreekanth Anasa   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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Comments on this article and AMD stock

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Toshiya Hari's (Goldman Sachs)analysis on AMD, as an investment, is faulty at it's core. It neglects several key developments over last 18-20 months that will boost the companies P/E ratio and make it outperform expectations that exist now.

1. In Sept 2015 AMD gave more autonomy and branding free reign to Radeon by spinning the graphics portion of AMD into a it's own division. This is important in some of the below reasons.

2. Intel dropping NVidia in favor of AMD. In 2016 CPU competitor Intel chose to not renew a contract for video graphics software/hardware (primarily a legal issue) and picked up AMD (known as Radeon) instead. This will make Intel pay hundreds of millions of dollar over a 5 years period to Radeon (AMD) for these rights. This means that even Intel integrated graphics may be branded Radeon. The only way this is possible is due to #1 above.

3. Gaming consoles favor AMD. AMD has a history of being less expensive than competitors. In the console market this is a key factor in part acquisition. All or nearly all of the console makers are leaning or have already announced the AMD APU (a CPU and GPU in the same single package). This means that in addition to the sales in the desktop market AMD is beginning to pickup huge market share in the console market. The lead is so large that most industry analyst don't see anyone else taking more than 20%-25% in the distant future. This means AMD will have 75%-80% market share in a $100 Billion a year industry. The interesting thing is that the only other real player in the APU market is Intel which will soon convert to Radeon anyway. So even if the CPU portion of the chip is Intel the GPU will be all Radeon. That is called market DOMINATION!

4. The number 8. AMD is set to absolutely command the industry news for 8 straight quarters. Due to the spin off of Radeon, new product introductions that were previously timed to within the same quarter are no longer done that way. The new R7 processors were released in Q1 while Radeon is set to release the 500 series graphics refresh and the all new Vega in Q2. Followed by Q3 launch of R3 and Q4 launch of the APU lineup. Then in Q1-Q3 2018 the launch of the Naples server based CPU line from AMD.

5. Redmond. In 2016 Microsoft was forced to add support for the Vulkan API by the only two PC chip makers on the block. Since Intel will soon use Radeon Graphics both AMD and Intel forced MS to include the API in the base code for Windows 10. However, this was actually likely to come anyway, as the soon to come, Xbox replacement will be running AMD Radeon Graphics. That leaves NVidia the only major player in the graphics card world running solely DirectX. Most industry analyst see this move coupled with MS joining the highest level of Linux Foundation as clear indication that DX is dying and MS knows it. That would force NVidia to pay Radeon to use their API but would most likely be marketed as AMD and not Radeon (once again due to split)!

It is clear that AMD has a well defined strategy for the future. Sure the next few months will see some ups and downs in the stock. Particularly because "financial analyst" aren't seeing all the parts coming together. I find it interesting that while Goldman Sachs downgraded the stock, they bought a HUGE amount of that same stock at the same time. Either Goldman doesn't like to make money (highly unlikely) or they internally don't have the same outlook as Toshiya Hari.
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Couldn't agree more. AMD will go WAY higher when institutional investors start to grasp the possibilities of the company. That will start happening after May 1st and escalate in
late July/ early August earnings call.
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