Buying interest waned after Advanced Micro Devices (NASDAQ:AMD) shares peaked at $41.79. Unfavorable valuations might continue to limit the stock’s uptrend above $40. Yet investors who bought the stock in the last year need not be disappointed. They need to hold and wait for fundamentals to catch up.
Ramping up notebook CPU and GPU sales will take time.
AMD has a limited marketing budget to promote its Ryzen chip refresh. The strong GPU product line could also benefit from more marketing support. But until more OEMs switch from Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) and offer more AMD-powered products, AMD’s revenue growth will be limited.
AMD must also pay down its debt instead of spending on marketing and other expenses. The healthier balance sheet will enable the company to redeploy its free cash flow growth in R&D activities. As its products offer more performance than Intel and Nvidia, customers will inevitably switch. Still, there are some limits to AMD’s sales growth rates. The company recently introduced a Ryzen Threadripper 3990X that has 64 cores. At 128 threads, 288MB in total cash and a TDP of 280 watts, the powerful processor does not come cheap. The most expensive version of the third-gen chip will cost $1,999.
This is out of the reach of nearly all consumers.
But companies that demand timely video post-processing may opt for an AMD-powered solution.
Your Takeaway
AMD’s advancements over the years in CPUs and GPUs are undeniable. But in the short-term, Intel will not give up without a fight. Steep price cuts will lift Intel chip sales and could hurt AMD.
