The Bear Case for Advanced Micro Devices

Despite the fact that Advanced Micro Devices (AMD) has a few things going for it, I think the stock is still a dead money investment and investors should stay away from it for the time being. The recent licensing deal with Intel can help the company greatly, but there’s massive risk involved.

There are some disadvantages regarding licensing deal with Intel, and one of the major issue is that Intel might have offered this deal to Advanced Micro Devices as a bargaining chip contrary to NVIDIA, as the licensing agreement between NVIDIA and Intel expires next year and it could be a solid gamble that Intel is offering a deal to Advanced Micro Devices only to put pressure on NVIDIA for giving it a discount.
If this is what Intel planning to do, it will never move forward with Advanced Micro Devices once NVIDIA dilutes cash regarding the license renewal terms.

As a matter of fact, it is well known that Advanced Micro Devices has insufficient resources. If the deal with Intel is more than just licensing, then Advanced Micro Devices could face more problems, as it needs a lot more resources for the joint development of the graphics technology to meet the Intel’s need. Furthermore, it will restrict Advanced Micro Devices’ available resources for other projects.

Apart from this, promising substantial manpower and finances to a determined project, together with separate projects, could lead to a delay or effect the relevance of the company’s forthcoming GPU or APU releases.

On the other hand, there is other concern that giving away tech to Intel would result in making Advanced Micro Devices’ APU less striking. Supposing that using the company IP in Intel chips would all at once make the latter’s offerings more influential in respect of graphical processing proficiencies.

However, it is not essentially right, as the proficiency of Intel’s GPUs rests on various factors like chip architectures, number of transistors assigned to the unit, and clock speed. And it is highly likely that shifting to Advanced Micro Devices’ IP would make a severe difference to make its complete range APUs immaterial. This can be said because if Advanced Micro Devices’ IP was actually so efficient then the company would have a widely held share in the distinct GPU segment.


Historically, Advanced Micro Devices has struggled against its competitors. Intel’s deal can further distract the company from its core business and if it doesn’t go through, Advanced Micro Devices will struggle. Thus, I think investors should stay away from the stock.
Published on Mar 29, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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