For a few weeks amid the increasing stock market selloff, shares of Advanced Micro Devices (NASDAQ:AMD) held the $45 to the nearly $60 peak. That ended on March 12, 2020, when the stock traded in the $40 level. AMD held a conference call to re-affirm its outlook but markets are not buying it. Valuations are still holding back AMD’s upside.
AMD won a $400 million supercomputer deal that uses Hewlett Packard Enterprise’s (NYSE:HPE) Cray computer unit. But that is a small win. Investors are looking up to Zen computer chips and Radeon graphics chips to accelerate revenue growth.
At the $40 level, AMD is valued at 28 times earnings. Yet after all sorts of shut-downs, from sports leagues to airline travel, the “stay at home” way of life will hurt the economy. Unless those working from home or are in isolation will go out to buy an AMD-powered gaming system, AMD stock risks falling. Competitor Nvidia (NASDAQ:NVDA) is faring better, losing half of much in the last month. Nvidia’s centralized GPU solution may benefit from work from home scenarios. But if demand for GPU-powered computing weakens, revenue growth will slip.
Now is not the time to hold AMD stock. Applied Materials (NASDAQ:AMAT) and Micron (NASDAQ:MU) are less expensive stocks and they, too, are not immune to the stock sell-off.
