Advanced Micro Devices, Inc. (NASDAQ:AMD) stock has been in a continuous downtrend since June 8th. Is a rebound around the corner?
Advanced Micro Devices, Inc. (NASDAQ:AMD) stock has struggled of late for multiple reasons and continues to be very volatile. Shares of the Sunnyvale, California-based semiconductor company have lost more than 11% of their value since hitting this month's high of $12.90 a share on June 8th. The recent tech rout made things even worse for AMD. Even the latest positive developments for AMD were overlooked by investors with the stock being in the red continuously on account of overall weakness in tech stocks amid valuation concerns. However, this narrative could change with AMD's EPYC server product line's expected launch on June 20th. The shares of chipmaker have a tendency to rally ahead of major product launches. So, will AMD stock rebound this time around as well? Here's what investors should take note of.
EPYC server product could be a game changer for AMD.
Previously codenamed “Naples,” AMD's EPYC server product line would be the company's first compelling offering in the data center space in more than a decade. The success of the EPYC server family would have a great impact on the financials of the chipmaker. To put things into perspective, Intel (NASDAQ:INTC) has an absolute majority in the datacenter space with 99% market share. Earlier in the year, at its investor day, the Chipzilla stated that it sees the total available market (TAM) of $60B for its data center business. Jim Anderson - Senior Vice President & General Manager, AMD at the recently concluded Stifel Nicolaus 2017 Technology Internet & Media Conference said they estimate data center to be $21B TAM for their offerings which "includes server chips as well as graphics processors that will be used in data center compute". The data center space is a very big opportunity for AMD to make a mark where it is presently almost non-existent and the leaks have hinted at EPYC to be a killer product.
The success in data center space could be a game changer for AMD, mainly for two reasons. Firstly, server solutions carry the highest ASPs and margins out of all the target market segments of AMD. With such a big market opportunity ahead, the success in this segment could significantly boost the financials of the semiconductor company. Secondly, AMD is a much smaller company compared to Intel and with Intel's monopoly in this space, a minor gain in market share would be a big success for the CPU and GPU maker. AMD CEO, Dr. Lisa Su, had previously told investors that the company has set a goal of retaking 10% of the data center business. Coming to finer details here, the Chipzilla's "data center business was worth $17.2 billion in 2016. Even a 5 percent revenue share, half of AMD’s current target, would be worth about $215 million per quarter to AMD." This would mean a significant addition to AMD's top line, adding nearly one-fifth of the company's Q1-2017 revenues. A positive response to the product launch could drive the stock higher again.
Technical outlook for AMD stock.
The technical outlook for AMD looks rather bearish in short-term. In the last trading session, shares of AMD made a bearish crossover closing below its crucial short-term 20-day Simple Moving Average(SMA). Of late, the stock has struggled to bounce off its 20-day SMA on breaching it. Presently, AMD shares have fallen below its all key SMAs, be it the 20-day, 50-day or the 100-day SMA. This is an overall bearish trend. Further, Moving Average Convergence Divergence (MACD) is on the verge of a bearish crossover. The MACD line is tentatively placed, just a few values away from the signal line. If the stock continues to be in the red then the MACD line is set to make a bearish crossover in the next trading session itself.
Playing AMD stock.
In the recent past, AMD (NASDAQ:AMD) stock has seen a major upward movement ahead of key events, be it the Ryzen CPU launch or other presentation events like its investor day. The EPYC product line launch could be such one event with Vega GPU launch to follow. A Seeking Alpha author in his analysis of EPYC server products against Intel's offering has concluded that "AMD appears so far ahead that it is doubtful that Intel can catch up with AMD even with its next generation server chips. AMD technology group has delivered and now it is time for the sales organization to deliver. AMD has compelling server solutions that can take meaningful market share away from Intel". Such narrative in an overall sense looks very attractive for AMD. If AMD manages to announce any major EPYC adoption partner and the product also manages to live up to the expectations then this could be a game changer for the company. The positive response for the EPYC family could be the catalyst which could help AMD overcome the bearish technical outlook and the stock may resume its uptrend. However, the highly volatile nature of AMD stock makes it a very risky bet.
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