Even as analysts chime in with their positive commentary, Advanced Micro Devices Inc's (NASDAQ:AMD) Vega GPUs are causing a stir.
Shares of Sunnyvale, California-based Advanced Micro Devices Inc (NASDAQ:AMD) have been all over the place lately. But if you've held AMD stock long enough, you're definitely not new to this. AMD shares have been extremely volatile for a while now, with raging rallies and sharp declines. However, there seems to be a lot of good news for AMD shareholders. Even as analysts have reiterated their faith in the company's CPU business, recent reports suggest that AMD's GPU launches are also going to give NVIDIA (NASDAQ:NVDA) something to worry about. AMD seems to have done a good job in terms of the performance and pricing of these GPUs. And if reports of prices being revised upwards turn out to be just rumors, then the stock looks set to move higher from here.
Analysts Reiterate Their Faith In AMD Stock.
While analyst commentary isn't exactly the writing on the wall, there's no doubt that analysts' opinions do move stocks. They shape the sentiment around a stock, and this time around, two separate analysts had something very positive to say about AMD's CPU business. Vivek Arya, of Bank of America Merrill Lynch is one of them. Arya believes that AMD's Ryzen CPUs are doing well, and actually giving Intel's chips a reasonable amount of competition. AMD launched its Ryzen 7 set of CPUs in March this year, followed by its mainstream offerings, dubbed Ryzen 5, about a month later. These chips have not only caught the attention of the market, but as it appears, they have also impressed.
Quoting the analyst, he says, "Our industry checks show improving mindshare/shelf-space for AMD's new Ryzen desktop-PC processors, incl. 30-50% share at prominent e-tailors, well ahead of AMD's 11% current desktop unit share." Arya is of the opinion that this positive momentum will soon translate to gains in AMD's stock price, reiterating his 'buy' rating on the stock, and sticking with his price target of $18 per share. Arya's price target implies an upside potential of nearly 40% from its last traded price of $13.02 per share.
Arya, though, is not the only analyst who's bullish on AMD's CPU business. Bernstein's Stacy Rasgon seems to share this sentiment, noting that AMD's chips are now starting to impact Intel. Rasgon believes that the first signs of trouble, and the impact of competition from AMD are starting to show up in Intel's numbers, in the form of falling average prices of desktop chips. And while Intel did report strong second quarter revenue growth, Rasgon attributes that to "over-shipping" the PC market. The analyst also finds the performance of Intel's data center group to be "underwhelming". As far as AMD goes, Rasgon says "numbers admittedly did go up, some believe conservatism is baked into forward outlook, and at least optically the shares appear cheap."
AMD's Vega GPUs Make A Good Impression.
While Arya believes that better multi-tasking ability or productivity, broader OEM placement and value for money will help AMD on the CPU side, he's also bullish on the GPU business. With reference to early reviews of AMD's Vega GPUs, Arya says they are "mostly positive and demand appears to be strong as popular online retail site NewEgg sold out of its initial allotment within 15 minutes". In the same context, Seth Archer of Business Insider says "The cards are currently sold out on Newegg, and only a few units are still available on Amazon, though they are selling at much higher price than the manufacturer's recommended price." Archer believes that AMD is now challenging Nvidia's crown.
Meanwhile, Gizmodo claims that chips by the two companies are "neck and neck", which is good news for AMD shareholders. A recent post by Gizmodo, compares AMD's new Vega 64 and Vega 56 chips with Nvidia's 1080, and the key takeaway is that AMD's chips are competitive. The costlier Vega 64, priced at $499 per unit, seems to be on par with Nvidia's chip. However, the author believes that it's the Vega 56, priced at $399 a piece, which is the surprise package, churning out impressive performance at relatively lower prices. In comparison, Nvidia's 1080 sells at about $600 per unit. Quoting from the post:
"What was really astounding was the performance of the $400 AMD Vega 56. Despite being considerably cheaper than both the Vega 64 and the Nvidia 1080, it played Overwatchand Civilization VI only marginally slower. The 1080 managed 112 frames per second playing Overwatch on Ultra at 4K, the the Vega 64 did a slightly faster 114, but the Vega 56 pulled of 99 frames per second at 4K with the graphics cranked to Ultra. That’s not just a little respectable, that’s really damn good. In Civilization VI the difference was even smaller, with the Vega 56 only taking about 1.5 milliseconds longer between frames than the 1080 or Vega 64. In one case the Vega 56 did even better than the $500 Nvidia 1080, and was on par with the more expensive Vega 64 too."
But, There Are Concerns.
That said, there are two concerns you should bear in mind. According to Alex Cranz, AMD's chips are more power hungry. And since this has been the case, more or less always, it isn't very surprising. The Vega 56 requires 210 watts of power to run, while the Vega 64 requires a whopping 295 watts, in comparison to the Nvidia 1080's demand of 180 watts. Cranz explains that "the cards that go in your desktop PC are very power hungry. If your power supply can’t provide enough juice, the GPU is worthless." That's where Nvidia does well to stave off competition from AMD. That said, it remains to be seen how the GPU segment does for AMD. A rumor claims that AMD's pricing is an “introductory offer”, and that's the second concern. While this only a rumor for now, if it is indeed the truth, it changes the dynamics based on which these chips are being evaluated. A change in pricing will undoubtedly change the equation, and chances are, they could swing in Nvidia's favor. AMD stock has been very volatile, as is evident from the chart below, and this is one of the risks investors ought to consider.
That said, things still look a lot more positive than negative for AMD stock. While the CPU business seems to be faring well, help from the GPU business could potentially drive AMD stock higher. Looking for great tech stocks? Check out Amigobulls' top stock picks, which have beaten the NASDAQ by over 142%. If you're a technical trader, you should also check out our daily stock trading ideas section for a list of crossovers and other popular trading signals.