Shares of Advanced Micro Devices (NASDAQ: AMD) are down over 35% YTD on concerns that the weaker consumer sentiment may weigh on demand for hardware.
Barclays Accelerates AMD Stock Losses
Barclays analyst Blayne Curtis recently downgraded AMD’s stock to Equal Weight from Overweight and reduced the price target to $115 from $148, sending its shares tumbling 5%.
In his note to investors, Curtis wrote the chipmaker’s growth “needs a pause” ahead of potential cyclical risks in 2023.
“AMD still looks positioned to gain share this year in both the client and server markets, and while we do see upside to the 31% growth target this year, where we have an issue is for 2023, as we see cyclical risk across several end markets” including gaming, PC, and broad-based, all of which are currently performing at high levels, which could harm AMD’s growth.
Since the Barclays call, AMD stock is down roughly 10%.
The semiconductor company said it agreed to purchase the cloud startup Pensando for $1.9 billion to reinforce its data center offerings and leverage the rapidly growing demand for cloud and enterprise solutions.
Founded by four former Cisco engineers, Pensando is a California-based startup that develops new edge solutions and programmable processors for cloud and enterprise computing. Its clients include Goldman Sachs and Microsoft’s cloud business Azure, among others.
Pensando’s platform allows companies to operate similar to cloud computing data centers such as Amazon Web Services (AWS). The cloud computing sector is experiencing a boom as it enables customers to order as much computing power as required in a matter of minutes.
AMD is facing serious competition in the profitable data center chip sector, with Intel and Nvidia as its main rivals.
In March, Nvidia introduced a new chip developed to accelerate AI operations in data centers. Moreover, Nvidia released a new chip to speed up artificial intelligence functions in data centers.
AMD’s deal with Pensando is expected to close in the second quarter of 2022. The startup’s CEO Prem Jain and her entire team will be joining AMD’s Data Center Solutions Group.
AMD finalized its acquisition of Xilinx in February in a record chip industry deal of $50 billion, reinforcing the company’s position to compete with Intel and other rivals in the data center chip sector.
AMD announced its plans to buy Xilinx in October 2020 in a deal that was initially valued at $35 billion. However, the rise in AMD’s stock price has elevated the price tag of the deal.
How Did AMD Perform in Q4 2021?
The chipmaker reported better-than-expected Q4 2021 earnings and issued a robust sales outlook for this year.
AMD reported adjusted Q4 EPS of $0.92, beating the consensus estimates of $0.76 per share and up 26% from the year-ago period. Revenue came in at $4.83 billion in the period, above the expected $4.53 billion and up 49% year-over-year.
The company said it expects 2022 sales to hit $21.5 billion, well above the analysts’ estimates of $19.26 billion, and up 31% from 2021 sales. It anticipates $5 billion in sales in Q1 2022, fueled by strong demand for server and PC processors.
AMD’s sales rose 68% last year, with gross margin surging to 48%. The company has been capitalizing on robust PC and electronics sales over the past two years, launching new chips that are significantly more powerful than its predecessors.
The company’s revenue in its cloud and graphics business rose by 32% to $2.6 billion, driven by solid sales of its Ryzen processors and Radeon graphics processing units. AMD’s Embedded, Enterprise, and Semi-custom segment sales jumped 75% to $2.2 billion thanks to strong demand for server chips and game consoles.
“We expect [semi-custom] revenue to grow this year driven by continued strong demand for the latest Microsoft and Sony consoles,” said AMD CEO Lisa Su, adding the new console upgrade is outshining prior versions.
Shares of AMD are down 35% YTD with some investors concerned about slowing demand. AMD shares experienced strong growth last year, hence some traders may see the ongoing pullback as an opportunity to buy more AMD stock given the company’s robust financials.
Beat The Market With Our Expert Stock Picks
If you invested in 10 of our featured stock picks over the last 5 years, your chances of beating the market would be 90%.
Our last 3 stock picks grew a combined 348% after our alert!
Want to be notified the next time we issue a “Big Buy” alert or update our stocks to buy list? Sign up below today.
CVS to Acquire Signify in an $8 Billion Deal
Following recent media reports that the healthcare company CVS Health Corp (NYSE: CVS) is in advanced discussions to acquire home-healthcare provider Signify Health (NASDAQ: SGFY) for roughly $8 billion, two companies confirmed the deal on Monday. CVS agreed to...
Nvidia Stock Falls on China Warning
Nvidia shares dropped on Wednesday after the United States government limited sales of top AI chips to China. The tech company claims that its A100 and H100 high-performance AI chips would be impacted by the limitation in order to lessen the possibility that the...
Best Stocks to Invest for 2022 (September, 6)
September 6, 2022, World Wrestling Entertainment (NYSE: WWE) and Live Nation Entertainment, Inc. (NYSE:LYV) These two entertainment juggernauts have all the catalysts in the world pushing them as the best stocks to buy now. Just because American markets were closed on...
Volkswagen’s New CEO Wants to Accelerate EV Transition
On the first day on the job, Oliver Blume informed the public that Volkswagen will quicken its transition to electric vehicles (EVs), but that the company has to find the correct "rhythm" as it makes the necessary changes. Blume revealed a ten-point strategy...
Lululemon Athletica Shares Soar on Another Set of Strong Results
Lululemon Athletica shares increased by roughly 9% in after-hours trading Thursday, as the company announced quarterly earnings and revenue that exceeded analysts' estimates. U.S.-Canadian retailer reported better-than-expected results despite rising costs hurting...
Why is Best Buy (BBY) Stock Trading Lower This Week
Shares of Best Buy (NYSE: BBY) are down over 5% this week after the retailer reported a 13% drop in sales for the second quarter on Tuesday as consumers grew weary of inflation-driven price increases. How Did Best Buy Perform in Q1? Despite the sales...
Best Stocks to Buy Now (September 2)
September 2, 2022, Signet Jewelers Limited (NYSE:SIG) and Pure Storage, Inc. (NYSE:PSTG) Despite selling off following decent earnings, these two companies have considerable upside as the best stocks to buy now. As recession risks mount, the market is amid a...
Why EV Maker XPeng Shares are Down
Shares of the Chinese manufacturer of electric vehicles, XPeng (NASDAQ: XPEV), are trading over 20% lower in August after the EV company disclosed a wider-then-anticipated loss for the second quarter and disappointing delivery expectations. How Did XPeng...
Best Stocks to Buy in September 2022
September 1, 2022, Scorpio Tankers Inc. (NYSE:STNG) and EOG Resources, Inc. (NYSE:EOG) Singled out by a legendary growth investor, these energy standouts have more room to run as the best stocks to buy now. Investors appear to be in full-blown panic mode. The...
Dell Stock Hits Multi-Month Lows as Demand Weakens
Shares of Dell Technologies (NYSE: DELL) fell to their lowest level since 2018 earlier this week after the technology company reported solid Q2 results but warned of a significant slowdown in the second half of the year as raging inflation continues to weigh on...