AMD Stock: Why You Should Sell It [DETAILS]

Posted On August 9, 2017 7:57 pm

The AMD Markham Office in Canada

Pictured above, Advanced Micro Devices’ Markham Office in Canada (Photo Sources: Wikipedia Commons)

Financial services firm Barclays dropped a bombshell on Advanced Micro Devices, Inc. (NASDAQ:AMD) investors on Tuesday, saying the AMD stock would fall to $9.

Barclays analyst Blayne Curtis thinks that the demand of AMD GPUs which surged on the back of the cryptocurrency craze won’t last much longer. The analyst thinks that the main reason behind the chipmaker’s latest upbeat earnings was the revenue injection due to Ethereum tailwind.

Related: Why Are Investors Bearish on IBM Stock?

AMD is losing the GPU market share to NVidia, whose graphics cards are the famous among the gaming community. Curtis, however, noted in the report that AMD is expected to gain market traction with its server chips (Epyc).

When Advanced Micro Devices, Inc. (NASDAQ:AMD) announced to enter the deep neural networks market, investors loaded up on AMD stock as there were high expectations that the company would monetize its server chips on the back of the AI, driverless cars and machine learning boom. But AMD is unable to keep up with the tough competition.

NVidia, which has over 70% of the GPU market share, is in a better position to take benefits from the DNN market, because GPUs are used in neural networks. Advanced Micro Devices, Inc. (NASDAQ:AMD) chips are notorious for taking a lot of power.

Related: Is NVidia a Stock Still Worth Buying?

The company claims that its Naples platform will be optimized for GPU and accelerator throughput computing. The market is experiencing a huge influx of new players, including Qualcomm and Intel. A Japan based company, Fujitsu Ltd., is set to disrupt the market with a deep learning platform which will have process speed ten times the speed per watt of existing market offerings. The company will launch its product in 2018.

Advanced Micro Devices, Inc. (NASDAQ:AMD) GPU sales are at all-time low, despite the fact that the company keeps on launching low-priced products. According to a survey by Steam, AMD popularity among gamers is faltering. AMD recently launched much-anticipated Vega GPU platform, but its effects will take a lot of time to weigh in.

Related: Here’s Why You Shouldn’t Buy Netflix Stock

PC Video Card Usage By MFG Chart

APC Video Card Usage By MFG Chart. (Photo Source: steampower.com/hwsurvey)

The problem with AMD isn’t related to its fundamentals. It’s related to the market competition. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s growth trajectory won’t be able to meet the market expectations in the coming months — and AMD stock will lose value. Revenue in the second quarter rose by 19%, while revenue growth in the third quarter is expected to come in at 15%.

However, this growth doesn’t come close to NVidia’s, which is actively diversifying its revenue streams and gaining exposure to secular growth markets like AI, Cloud, machine learning, and self-driving cars.

Therefore, you should sell Advanced Micro Devices, Inc. (NASDAQ:AMD) to avoid losses in the coming weeks.

Related: Should Apple Investors Still Be Optimistic?

About author