Dump Advanced Micro Devices After the Recent Rally

To the surprise of many, shares of Advanced Micro Devices (AMD) rallied over 50% after the company released its quarterly results. However, the rally didn’t last long and Advanced Micro Devices gave back most of the gains in the next trading session. Advanced Micro Devices investors should use the recent rally to book profits as I expect the stock to head back under $3 soon.

Lisa Su’s efforts

Advanced Micro Devices’ new CEO Lisa Su has performed very well by preparing the company to introduce Zen-based processors for data centers and by forming RTG (Radeon Technology Group).
These two choices are paying off in terms of virtual reality and gaming.

Advanced Micro Devices with the support of RTG is manufacturing semi-custom SoCs for gaming consoles. According to a report from Ars Technica, Advanced Micro Devices’ administrators are forecasting a 15 percent consecutive top-line growth in the approaching quarter, mainly due to three semi-custom SoC victories in the gaming segment, which could possibly produce approximately $1.5 billion in revenue throughout the coming four years.

On the other hand, Ars Technica guessed that Advanced Micro Devices’ SoCs could be used in Nintendo’s forthcoming console titled as Nintendo NX. However, PowerPC architecture is still being used in Nintendo’s Wii U, and there are rumours that Sony and Microsoft could replace IBM’s PowerPC architecture by Advanced Micro Devices’ x86-64 bit SoC.

Advanced Micro Devices expects that other two victories could be an imminent Xbox refresh and an enhanced version of PlayStation 4 titled as Neo. In the case of graphics cards market, these will be the most substantial wins.

Apart from this, Advanced Micro Devices recently partnered with Crytek. The company detailed that it wants to convey Crytek’s Virtual Reality First initiative into the VR labs of universities and colleges so as to offer students and developers a ready-made Virtual Reality solution.

The company’s strategy is to equip the Virtual Reality labs with its latest Radeon Pro Duo graphics cards together with LiquidVR SDK. Crytek is about to launch its Film Engine tool very soon. With the help of Film Engine, Crytek is pointing to capture both the game development as well as Hollywood industry by a squall. Due to this AMD will gain an advantage as the Film Engine will use the company’s Radeon Pro Duo GPU rendering engine.

Conclusion

Despite the arrival of a new, efficient CEO, I don’t think Advanced Micro Devices can sustain its rally. The company is still losing the battle with NVIDIA and should continue doing so. For these reasons, I think investors should sell the recent rally.
Published on Apr 25, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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