Advanced Micro Devices, Inc. (NASDAQ:AMD) continues to interest us as a technical and fundamental play following the stock’s recent implosion after reporting Q3 data and Q4 guidance. In our last piece, we identified an area on the chart that offered a number of critical technical factors working in confluence.
As we noted there, the move lower has entered a zone on the chart that represents confluence of the 200-day simple moving average, the critical breakout trigger level from the stock’s late July breakout, and the 61.8% Fibonacci retracement level of the stock’s low-high range for 2018. That zone is roughly $16.90 – $18.30. The stock closed the week at 17.63, right in the middle of that range. We saw a dip slightly under that zone and then a strong bounce back to the top of it.
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares have been one of the most obvious victims of perceived weakness in the chip cycle, with guidance from the company reinforcing the sense established by MKSI and TXN the prior day. However, following those reports, we heard from XLNX and INTC, which powerfully challenged the paradigm that the chip cycle is the problem here.
As we see it, the problem for AMD is speculative inflation of the stock price partially driven by the bitcoin mining bubble, the perception of a durable CPU shortage, and the perception of a persistent bear market in the semi space that got underway over the summer.
However, we are working through (and probably have now completely worked through) the speculative inflation issue. That brings us to the notion of a durable CPU shortage and the perception of a persistent bear market in the semi space that got underway over the summer.
Those two issues are at least partly uncontroversially challenged by a beat and raise from both XLNX and INTC, as well as comments from MSFT on its call. In each case, we saw evidence that certainly throws significant doubt about a bear cycle now in progress in the semiconductor space, and we clearly see healing where the notion of a CPU shortage is concerned.
Given the powerful levels of technical support in play for AMD, we remain in the camp that one stands to see far more upside than downside in new exposure from this zone.
Birds Eye View
Advanced Micro Devices, Inc. (NASDAQ:AMD) bills itself as a semiconductor company worldwide. It operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom.
The company’s products include x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete and integrated graphics processing units (GPUs), and professional GPUs; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles.
It provides x86 microprocessors for desktop PCs under the AMD Ryzen, AMD Ryzen Pro, Threadripper, AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU, AMD Sempron APU and CPU, and AMD Pro A-Series APU brands; microprocessors for notebook and 2-in-1s under the AMD Ryzen processors with Radeon Vega GPUs, AMD A-Series, AMD E-Series, AMD C-Series, AMD Z-Series, AMD FX APU, AMD Phenom, AMD Athlon CPU and APU, AMD Turion, and AMD Sempron APU and CPU brands; and microprocessors for servers under the AMD EPYC and AMD Opteron brands. It also offers chipsets under the AMD brand; discrete GPUs for desktop and notebook PCs under the AMD Radeon and AMD Embedded Radeon brand; professional graphic products under the AMD Radeon Pro and AMD FirePro brands; and customer-specific solutions based on AMD’s CPU, GPU, and multi-media technologies.
Advanced Micro Devices, Inc. (NASDAQ:AMD) pulled in sales of $1.7B in its last reported quarterly financials, representing top line growth of 0.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1.1B against $1.9B, respectively).