Seasonal Strength Approaches for Advanced Micro Devices

A one-year chart will show AMD’s (NASDAQ: AMD) 29% return pales compared to Nvidia’s (NASDAQ: NVDA) over 130% gain. But not long ago, AMD’s stock traded below $2 a share. Last quarter’s mediocre performance and downbeat guidance may have hurt the stock price but AMD is entering a period of seasonal strength.

AMD launched Ryzen 3, a budget-friendly CPU that will lead to market share gains against its rival, Intel (INTC). Ryzen 5, a mainstream processor that was launched in April, should gain momentum as a preferred choice for consumers. The chip has a favorable cost/performance that strikes the right balance between between value and power. Prior to Ryzen, Intel had no competition for its mainstream Core i5 chips. With Cyber Monday and the holiday season, AMD’s chip sales will get a good lift.

Laptops will be a fighting ground for both AMD and Intel showcase them during the holidays. AMD announced Ryzen mobile processors with Vega graphics on October 26. The integrated solution should put some meaningful pressure for Nvidia and Intel. AMD claims the Ryzen 7 2700U and Ryzen 5 2500U offer power that is comparable to a desktop set-up.

At a 32x forward P/E, AMD is a good bet and has relatively good value compared to Nvidia, which trades at a forward P/E of over 45 times.