AMD bouncing back?

AMD was struggling since few months and investors were skeptical about whether to invest in this company or not to invest. Since few months its stock was depressed. Since PC sales was declined in past months, AMD was not looking good. Howvever the scenario looks a bit different now and favours AMD.

AMD is a solid engineering company. AMD has a great technology and is a leader in gaming chipset market. Major gaming device manufacturing companies (Microsoft, Nintendo, Sony, Apple) are using AMD’s graphics chipset. Considering the future outlook of the gaming market and graphics chipset providers, AMD has direct competition with NVIDIA. However AMD’s graphics chipsets are more energy efficient than others which is a major factor (You would not want your device run out of battery in a gaming battle ;-)). There are many other factors why low power chips are preferred. One can go deep into engineering comparisons (e.g. device heating, reliability, life, performance etc.)

AMD is trading at $3.28 and we expect it to rise. The company has reported positive results in third quarter of 2013 beating the market expectations. The boosting sale of gaming consoles benefited AMD and the trend looks going forward. (http://www.bloomberg.com/news/2013-10-02/worldwide-video-game-console-sales-to-rise-in-2013-idc-projects.html). AMD reported its third quarter results with revenue increasing 26 percent quarter-over-quarter and 15 percent year-over-year. The company reported $48 million profit as compared to loss of $150 million a year earlier.

(snapshot taken on Nov 11, 2013 at 13.04 hrs (Eastern daylight time), courtesy: yahoo finance)

There are many other good reasons to invest in AMD. AMD is also a leader in server chipsets. The growth of cloud computing and big data centres will benefit AMD. AMD’s SeaMicro system is most energy efficient server in the market. AMD is continuing technology innovation in the areas of server, gaming chipsets which we expect is the right direction for the company to go for AMD.

AMD uses SOI technology (silicon-on-insulator) technology which offers significant advantages over bulk silicon technology which many other chip manufacturers uses: reduce parasitics, higher performance, lower power consumption, no latch-up (no extra circuity to prevent latchup, reduce area), increased density, low complexity process, reduced cross-talk, cold-sparing capability (higher system reliability). At nanoscale geometries (below 45nm) SOI technology offers great advantages over bulk silicon. As we see the future chipsets are coming at these nano-scale geometries, AMD has certainly an edge.

The sale of gaming consoles have given a boost to AMD. It has its processors in all major gaming consoles. Microsoft has highly customized its processors for their X-Box playstation. AMD’s Radeon brand processing units have always been favourite for gamers. AMD beats rival NVIDIA in gaming consoles.

We find from various sources that gaming revenue could cross $1B in 2014 which will turn out to be a clear win of those companies who are involved in the business. Since AMD is ahead of its competitors it will be a clear win if market projections are right. Nevertheless we suggest to buy AMD at the current price and expect it to rise up to ~10 in 4-5 months and at that time sell.

AMD’s accelerated Processing Units (APU) combine high performance processing cores (like many other competing mobile chipset vendors) enabling breakthroughs in visual computing, security, performance-per-watt and device form factor. AMD is clearly going to win in near future. AMD’s certainly has capabilities for a game changer.

We recommend to buy AMD at this current price $3.28 and hold it for few months. We expect that it will rise and be in range of ~ $10 in coming few months.

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