Despite heightened short-selling in shares of Advanced Micro Devices (NASDAQ: AMD), the stock is holding its post-ER gains. This suggests that the bottom, at a $9.25 share price, could be over and that the $10 - $11 trading range will begin. When the valuation multiples are at fair levels (19 times forward earnings), AMD may not go anywhere for now. The key driver for 2018 is EPYC’s rollout and the refresh in Ryzen chips.
AMD is getting favorable reviews for its Ryzen chip refresh. Ryzen 7 2700X earned a 9-star out of 10 on Tech Advisor. Despite the stiff competition in the marketplace, mainly from Intel (NASDAQ: INTC) refreshing its own lineup of desktop processors, AMD is in a modest position of taking on market share. The high core count, low heat dissipation, competitive price to performance and easy upgrade path suggests that Ryzen 2 sales will have a better success than the original launch.
Most consumers and businesses will wait for a second-generation release before upgrading. The strategy behind this is to wait for all the bugs to get ironed out. Ryzen had few, if any, major bugs or issues other than starting at a zero market share. With Ryzen motherboard backward-compatible with Ryzen 2, the cost to upgrade is $200 - $300 less than the Intel upgrade pathway. Then again, unless a Vega-powered integrated GPU is purchased, customers must also buy a discrete graphics card. That still might drive chip sales because PC gamers need a powerful GPU, anyway.
And that could lead to higher Vega GPU sales for AMD.
