Advanced Micro Devices (NASDAQ:AMD) rewarded shareholders with a ~1.5 times total return in 2019. The company’s CPU refresh gives AMD a wide lead over Intel’s (NASDAQ:INTC) desktop and notebook CPU market. In the near-term, the stock could face temporary selling pressure as investors lock in profits and wait for a pull-back.
At over 40 times forward earnings, AMD has no room to miss consensus estimates. Although Dell and HP Inc. featured its Ryzen CPU in mobile laptops, the stock already prices in a $0.26 EPS in the September quarter. This is up from $0.06 reported last year.
Intel, which traded at over $60 recently, should be underperforming the market if AMD is taking its market share. But investors seem to believe that the chip shortage will lift profit margins. Intel already slashed prices of its desktop CPUs to compete with AMD. That will have slowed AMD’s market share growth and increased sales of Intel CPUs.
On the GPU side of the business, AMD’s budget RX 5500 XT should help it slow the market share gains from Nvidia (NASDAQ:NVDA). Still, the GPU is slower than Nvidia’s mainstream GTX 1660 card. Gamers shopping for a GPU may opt for AMD’s latest card despite its price. Conversely, waiting for Nvidia’s GPU refresh on 7nm may hurt AMD’s GPU sales next year. That scenario is not priced in AMD stock.
