With companies prioritizing enhancing their artificial intelligence (AI) capabilities, AI hardware is making significant strides. Chip manufacturer Advanced Micro Devices, Inc. (AMD) recently launched its Instinct MI300 series chips for generative AI.
Boosted by improving investor sentiments, AMD shares have witnessed extraordinary growth this year, soaring 75.4% year-to-date. Moreover, the fact that institutional shareholders own a 73% stake suggests that the company has credibility in the eyes of smart money.
However, in considering potential investments, it’s paramount to review the fundamentals rather than relying solely on the perceived validation offered by the presence of institutional investors.
Notably, AMD experienced a 9% year-over-year dip in revenue in the most recent quarter, primarily attributable to weakness in the PC industry. Furthermore, the company’s bottom line slid into the red during this period. Under the weight of the ailing PC market, AMD’s topline could remain under pressure in the short term.
In addition, research firm Gartner predicts a global semiconductor revenue decline of 11.2% in 2023.
“As economic headwinds persist, weak end-market electronics demand is spreading from consumers to businesses, creating an uncertain investment environment. In addition, an oversupply of chips which is elevating inventories and reducing chip prices, is accelerating the decline of the semiconductor market this year,” said Richard Gordon, Practice Vice President at Gartner.
In light of these challenges, AMD may not currently represent the optimum chip stock choice. A closer examination of key financial metrics should reveal a clearer picture of the current situation.
Analyzing the Fluctuating Financial Performance of AMD
The trailing-12-month net income of AMD has witnessed considerable fluctuations over the observed period. Let’s review the relevant data:
- 2020:AMD reported a steady rise in net income from $879 million in September to a peak of $2.49 billion by the end of December.
- 2021:Consistent growth marked this year, with AMD’s net income expanding from $2.88 billion in March to $3.96 billion in September. However, a downturn was evident towards year-end, with net income decreasing to $3.16 billion in December.
- 2022:The oscillating trend carried into 2022 as net income rebounded to $3.39 billion in March, then dropped slightly to $3.13 billion in June. A significant decline appeared by the end of September, with net income falling to $2.27 billion. This pattern culminated in a sharp decrease to $1.32 billion by the close of December.
- 2023:A dramatic fall characterized the start of the year, with net income plummeting to $395 million in April. The comparison suggests a negative growth, emphasizing the need for further analysis, especially considering the most recent data.
The trailing-12-month revenue of AMD has presented consistent growth over the time frame from September 26, 2020, through April 1, 2023.
- Beginning at $8.64 billion on September 26, 2020, AMD has experienced steady quarterly increases in its revenue.
- The revenue increased to $9.76 billion by December 26, 2020.
- Continuing the trend, by March 27, 2021, AMD’s revenue was recorded at $11.42 billion and further increased to $13.34 billion by June 26, 2021.
- By the end of 2021, AMD reached a substantial highlight, with reported revenue reaching $16.43 billion on December 25.
- The upward trajectory carried on into 2022, with revenue peaking at $23.6 billion by the end of the year on December 31.
- However, a slight decrease was observed, with the revenue reported at $23.07 billion on April 1, 2023.
Calculating the growth rate from the first value to the last, we find that AMD’s revenue grew by approximately 167%.
- AMD started with a gross margin of 44.5% on September 26, 2020.
- There were slight fluctuating increases throughout the annual quarters of 2021, with an evident increase from 44.5% in December 2020 to 46.8% by the end of September 2021, amounting to a gross margin growth rate of roughly 5.17%.
- The highest gross margin for 2021 was observed on December 25 at 48.2%, up from 44.5% in the same period of the previous year, indicating an 8.3% annual increase.
- In 2022, the gross margin trend shows a decrease compared to 2021. The first quarter margin slightly went up to 48.5% in March but dropped to 44.9% by the close of the year, recording an overall decrease of 7.4%.
- The series extends into 2023 with data up to April 01, showing a further decrease, placing the current gross margin at 44.0%. It points to a significant decline compared to the previous quarters of 2022 and 2021.
Overall, AMD’s gross margin displayed an increasing trend throughout 2021, reaching a high point at the end of the year. However, it demonstrated a decreasing pattern in 2022, underscoring fluctuations in its gross margin during this period, with a steady decline moving into 2023.
Examining the Steady Upsurge in AMD Share Prices, 2023
Upon reviewing the data for AMD, several trends emerge concerning their share price:
- The share value of AMD started at $70.14 on January 13, 2023.
- By February 3, 2023, there was a consistent increase in the share price, recording a price of $80.71. This represented a growth rate increase of approximately 15% in about three weeks.
- The highest recorded value was $125.50 on June 16, 2023, representing an accelerating growth pattern from the starting date.
- This was followed by a slight decline ($113.52) as of June 23, 2023, indicating a decelerating trend from the peak.
- Then, the share price bounced back slightly in the next two weeks, settling at $114.34 as of July 7, 2023.
- The most recent price featured in the data is $113.58 on July 10, 2023, which shows a minuscule decrease from the price reported a week ago.
Overall, the data displays a general upward trend in the share price of AMD from mid-January to mid-June 2023. The trend indicates that shares are growing during this period, with a minor reduction after reaching a peak in mid-June. It is important to note that share prices can fluctuate due to various factors, and past performance does not guarantee future results. Here is a chart of AMD’s price over the past 180 days.
Analyzing AMD’s POWR Ratings: January-July 2023
AMD has an overall D rating, translating to a Sell in our POWR Ratings system. It is ranked #78 out of the 92 stocks in the Semiconductor & Wireless Chip industry. It also has a D grade for Stability and Value.
Analyzing the data, it appears that:
- The weekly grade was a D from January to July 2023.
- In terms of rank within the category, AMD started at position 90 in the second week of January, performing poorly among the batch.
- During these months, though, there has been a slight improvement. By July 2023, AMD improved its relative ranking and moved up to position 78, indicating an ascending trend, although still lagging behind most of the stocks in the category.
While an improvement is seen, AMD is yet to make significant strides in outpacing other stocks within its category.
How does Advanced Micro Devices Inc. (AMD) Stack Up Against its Peers?
Other stocks in the Semiconductor & Wireless Chip sector that may be worth considering are Infineon Technologies AG (IFNNY), SUMCO Corporation (SUOPY), and Renesas Electronics Corporation (RNECF) -- they have better POWR Ratings.
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AMD shares were trading at $111.56 per share on Tuesday morning, down $2.02 (-1.78%). Year-to-date, AMD has gained 72.24%, versus a 16.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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