AMD Stock Will Hold the $30 Line and Here's Why

The technology selloff in the last week pulled AMD stock as low as the $27-$28 range. That selling ended quickly when AMD (NASDAQ:AMD) announced its EPYC server won Google as customer. More big deals are on the way, which will justify AMD’s current valuations and a $30+ stock price.

On Aug. 8, AMD said its new EPYC chip will offer more speed than Intel’s (NASDAQ:INTC) pricier offering. The new server now counts Google as one of its customers. The search engine giant is already using Epyc to power its data centers. It will deploy more server farms to power its cloud services. And it chose AMD Epyc as the hardware.

The new server chip is manufactured on 7nm and has up to 64 processing cores. Conversely, Intel faces major delays manufacturing at that size. Since Epyc’s highest chip costs less than $7,000, customers will have a tough time justifying a lower performing Intel Xeon 8280M that costs $13,000.

In the second quarter, AMD reported modest revenue declines and issued a downside guidance for the current quarter. The reason for the results is mostly the slowing console chip sales and paying off debt. AMD reduced its debt by $392 million in Q2. Revenue fell 13% Y/Y to $940M due to lower graphics channel sales. Higher client processor and datacenter GPU sales offset that decline.

Debt totaled $1.29B, down from $1.685B last year. Its gross leverage is now 1.9 times, down from 2.5 times last year.

AMD stock has lofty valuations but investors are confident the re-investments back into the business will pay off.