Investor Alert

MarketWatch First Take Archives | Email alerts

Jan. 27, 2021, 7:37 a.m. EST

The AMD that investors bet on is finally here

Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Advanced Micro Devices Inc. (AMD)
  • X
    S&P 500 Index (SPX)
  • X
    Intel Corp. (INTC)

or Cancel Already have a watchlist? Log In

By Therese Poletti

Advanced Micro Devices Inc. has finally achieved many of its big goals that investors have been banking on over the past few years, as they drove its shares to become the biggest gainer in the S&P500 for two years in a row.

But now it faces a conundrum going forward.

On Tuesday, AMD reported a record fourth quarter, topping $3 billion in revenue for the first time to produce a record for full-year revenue of $9.76 billion, up 45% from the previous year. AMD /zigman2/quotes/208144392/composite AMD -1.04% produced record profit as well, and predicted big gains from these record results in the year ahead.

Yet shares sat basically still in after-hours trading — and are actually down a bit premarket. And that is where the problem is now for AMD investors: What happens next?

The company has been riding high on new chip families based on a new architecture, but the biggest hopes were around the company’s plans to re-enter the server market, which began in 2017 with a new Epyc chip. AMD is making big progress in that large and fast-growing market, and is about to launch its third-generation server/data-center chip family, code-named Milan. AMD said sales of chips sold to the data center were in the high-teens percentage of total revenue, but it still will not break out those sales.

“We are happy with the progress in the data-center business … 2020 was a strong year for us. We do see a significant growth into 2021,” AMD Chief Executive Lisa Su, said on the analyst call Tuesday. “I think there are a number of drivers … first of all, I think we’re seeing the cloud business strengthen for us.” She added later that AMD now has deeper customer relationships as a result of the positive reception to its products.

AMD’s stock was the biggest performer in the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.36% for both 2019 and in 2018, as the company began to show results.

Revenue growth was 45% in 2020, but the company’s forecast of 37% revenue growth for full-year 2021 shows that the law of large numbers is starting to take effect, resulting in slower gains.

Another issue at hand is that many on Wall Street believe that AMD has benefited by the missteps of its biggest rival , Intel Corp. /zigman2/quotes/203649727/composite INTC -0.42% . Now that Intel’s highly regarded new CEO, Pat Gelsinger, is about to take the helm, many are becoming jittery that a resurgent Intel could eventually make mincemeat of AMD.

“Intel’s white-knight CEO change has impacted the AMD narrative a bit in recent days as the AMD story hinges around them maintaining and growing their competitive position over the long term, hence newfound Intel hope has been coming somewhat at the expense of AMD, ” said Stacy Rasgon, a Bernstein Research analyst, in an earnings preview to clients.

With the stock currently trading at around 50 times Wall Street’s current estimates for 2021, investors are faced with a conundrum over determining how much more upside can they expect from AMD going forward. It’s a tough call.

US : U.S.: Nasdaq
$ 82.15
-0.86 -1.04%
Volume: 47.27M
April 16, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$100.82 billion
Rev. per Employee
+15.05 +0.36%
Volume: 2.21B
April 16, 2021 5:15p
US : U.S.: Nasdaq
$ 64.75
-0.27 -0.42%
Volume: 24.62M
April 16, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$264.78 billion
Rev. per Employee

Get news alerts on Advanced Micro Devices Inc. — or create your own.
This Story has 0 Comments
Be the first to comment
More News In

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.