Should you Buy into AMD’s Turnaround?

The last one month has been very good for Advanced Micro Devices’ (AMD) shareholders as the stock has close to 35%. Although the stock is still well below its 52-week highs, investors may be tempted into buying AMD’s turnaround story. However, in my opinion, the company’s chances of a turnaround are really slim, and investors would be better off looking at other speculative investments.

The company has struggled due to falling PC sales and increasing competition, and the aftermath of these things can be seen in the company’s recently reported quarter.

In Q3 FY2015, Advanced Micro Devices posted earnings per share of $0.17, $0.05 worse than the consensus estimate of $0.12.
The company’s revenue of $1.06 billion was marginally ahead of $995.8 million that analysts were modelling. Regarding business segments, Computing and Graphics Segment revenue was $424 million, an upsurge of 12%, chiefly due to higher sales of GPUs and desktop processors.

While the numbers weren’t very bad, the company faces several headwinds going forward. AMD has struggled to distinguish itself from its competitors, which is why I expect it to struggle.

Increasing competition in PC processors segment

Advanced Micro Devices is still concerned for its PC processor business, as it has declined significantly over the past few years. With PC sales still falling, AMD will have a tough time reversing its fortunes. However, that is not the company’s only threat.

AMD’s primary rival Intel (INTC) is trying hard to increase its presence in the market. Recently, Intel unveiled its new Skylake processor. The processors have been considered superior by many and as soon as the systems based on Intel’s Skylake processor arrive, AMD will be vulnerable to losing more market share.

AMD’s current products may not be able to compete with the Intel’s upcoming Skylake processor. This clearly means that company might face another full year of market share loss until its new products are a lot superior that Intel’s.

NVIDIA, a Gaming Leader

High-end PC gaming has traditionally been the field of desktop PCs. But nowadays, it has become more viable to attach ultra-fast processors and graphic cards into smaller, more thermally forced laptops.

According to a report from NVIDIA, the market for gaming notebooks has been mounting swiftly. Customers prefer to buy a laptop judging by screen size, and quality of GPU. And NVIDIA dominates the gaming laptop sector.

NVIDIA’s current Maxwell graphics architecture is a lot more powerful than AMD’s Graphics Core Next architecture. The company’s incompetence to fend off its rival will prove costly in the long-run, which is why I think betting on AMD’s turnaround isn’t a smart move.


The threat of increasing competition makes AMD a very, very risky bet. The company may have performed nicely in the last month, but its upwards trajectory is unlikely to continue. Given the better quality products of its peers, I think AMD will continue losing market share.
Published on Oct 28, 2015
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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