Advanced Micro Devices (NASDAQ:AMD) may have temporarily peaked at around the $33-$34 range. The stock caught a higher bid after Microsoft said it would use AMD’s APUs for its next-generation Xbox in mid-2020. With AMD offering more power, such as 8K, expect better average selling prices translating to higher revenue from the semi-custom segment.
The CPU powering the next Xbox will be a custom third-generation Ryzen with eight cores and on a 7nm Zen microarchitecture. The Navi GPU will be based on a next-gen Radeon RDNA architecture, enabling hardware-accelerated real-time ray tracing. Sony’s PS5 will also use AMD’s SoC (the combination of the CPU and GPU).
The last time AMD supplied to both Sony and Microsoft, shares traded in the low single digits. At the time, AMD had heavy debt and no CPUs to compete with Intel (NASDAQ:INTC). This time, AMD has a stronger position in the CPU space. Yet the Navi GPU push is a potential near-term headwind for accelerating growth. Nvidia pulled ahead of AMD with mid-range GPUs that are on par with Navi. That might explain why AMD topped $34 only to end last week at $29.10. The stock found support at the 20 and 50-day simple moving average.
Your Takeaway
AMD is still in a strong uptrend that began in Dec. 2018. As sales pick up for its CPU, GPU, and semi-custom chips in consoles next year, the stock will reward its loyal investors.
