After getting rocked by a disappointing earnings report, shares of Advanced Micro Devices, Inc. (NASDAQ: AMD) are stabilizing. Valuations are still unfavorable at this time: the forward P/E is high for a company still in a turnaround mode. Still, AMD has strong prospects relative to its above-average valuations.
Investors looking for value and stable growth may consider Intel (NASDAQ: INTC) or Micron Technology (NASDAQ: MU) instead. These two companies have favorable price-multiples on the market and steady profits quarter after quarter. AMD’s still on a multi-year turnaround that adds uncertainties, yet CEO Lisa Su is doing a remarkable job strengthening the company.
Threadripper, a powerful CPU for the HEDT market, will easily out-sell Intel’s i9 solution, relative to the marketing spend. Expect AMD selling a respectable volume of this chip on limited marketing expenses. Conversely, Intel will probably spend significant amounts to promote its Core i9 chip. The playground is big enough, though, that Intel’s profit margin will not shrink. AMD’s profitability will only improve as manufacturing costs fall and adoption for the chip increases.
On the GPU market, Nvidia will still enjoy strong sales of it GTX graphics card sales but AMD’s Vega will start gaining traction. Hardware driver optimization and price cuts will give Vega sales a lift.
Investors should not be counting AMD out. Its business, albeit bumpy, will improve over time.
