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AMD (NASDAQ: AMD) stock fell 8% in after-market trading yesterday (October 29) after the semiconductor giant posted disappointing Q3 results. Last year's Q3 performance led to a 114% gain in the following months but it seems unlikely to enjoy the same results this time around.
The price has already fallen significantly this year, down 24% from $211 in March. Now at $159, it's only up 15% year to date.
There was a lot of excitement in the run-up to Tuesday's results, adding to the pain. It enjoyed a 7.7% rise in anticipation of a positive report but all those gains have now been wiped out.
So what happened?
At $6.82bn, revenue came in slightly higher than analyst expectations of $6.71bn. Still, it's a 17% increase on last year's $5.8bn.
Earnings per share (EPS) came in line with expectations at $0.92.
But the biggest disappointment was its forecast for the fourth quarter. Analysts now expect revenue to come in slightly below previous estimates of $7.54bn, citing procurement issues.
When competing with record breaking stocks like Nvidiaexpected comparisons are not enough. Shareholders want to see companies hit the ball out of the park.
Despite 122% revenue growth in the data center segment, weaker segments dragged it down. Unlike Nvidia, which only focuses on GPUs, AMD has a very diverse range of products. Revenue in its gaming segment fell 69% and its embedded segment fell 25%.
However, the 12-month price average remains around $187, a 17% increase from the current price.
Why I love AMD
AMD is one of the leading semiconductor manufacturers in the US, specializing in the design of microprocessors, graphic processors and other semiconductor solutions. It is known to compete with Intel in the CPU space and Nvidia in GPUs, targeting both consumer and business markets.
Yours Ryzen processors are highly regarded in the consumer market, especially among gamers, while the EPYC processors intended for data centers. It also develops custom hardware chips, such as those in PlayStation again Xbox comfort him. Recently, it has been increasing its focus on artificial intelligence (AI), seeing rapid growth and demand in this area, especially among data centers and high-performance computing.
Its MI series GPUs, especially the new MI200 and MI300, are designed for high-performance computing and AI workloads, targeted at fields such as research, medicine, and scientific analysis. The MI300 mainly uses AMD's CDNA 3 Architecture, which is specially designed for deep learning and large-scale data processing.
A challenging market
Apart from the intense competition that AMD is facing in the semiconductor industry, there are other concerns. Supply chain risks, particularly in high-tech manufacturing, could impact AMD's performance. Global semiconductor demand has seen post-pandemic ups and downs, and while data center demand has grown, the consumer PC market has softened.
Like other technology stocks, AMD's price can fluctuate, particularly in response to changes in demand for semiconductors, broader economic conditions, and competitive pressures. Another concern is its very high price-to-earnings (P/E) ratio of 198.
All of the above factors can hamper price growth in the short term. However, while it's not the result I expected, I still like AMD's long-term prospects. As such, I plan to hold on to my shares for now.
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