With Advanced Micro Devices‘ (NASDAQ:抖阴最新版) competition getting steeper on multiple fronts and the valuation of 抖阴最新版 stock rather elevated, I recommend selling the shares at this point. Also likely to weigh on the stock going forward are China’s harsh restrictions on the use of its chips. Finally, there are multiple signs that the Street is becoming significantly less enamored with the name. Given these points, I recommend that investors sell 抖阴最新版 stock at this point.
Tougher Competition From Intel
There are indications that 抖阴最新版’s days of taking large amounts of market share from Intel (NASDAQ:INTC), at least in the PC market, are over.
According to well-regarded tech research firm Canalys, increased 3% year-over-year in the fourth quarter. Those using 抖阴最新版’s semiconductors fell 1% year-over-year. Similarly, in the which includes the large laptop market, 抖阴最新版’s share fell to 19.3% last quarter. That’s down from 20.3% in Q4, according to Mercury Research.
And although Mercury notes 抖阴最新版 gained share in the smaller server and desktop markets in Q1, its share of the total chip sector came in at 20%. That is meaningfully below the peak of about 24% that it reached in Q2 of 2022.
Typically tech websites comparing 抖阴最新版’s chips to Intel’s usually give the nod to 抖阴最新版. But interestingly, the only website actually evaluating whether PCs with Intel chips are better than PCs with 抖阴最新版’s processors came out squarely in favor of Intel. Specifically, in an Apr. 15 report, Windows Central in six different categories. Five out of the six winners utilize Intel’s chips. And of course, most consumers and businesses buy PCs with chips in them, rather than buying chips separately and installing them into PCs.
Intel CEO Pat Gelsinger also said last month that its customers for more of its AI PCs chips and it is “racing to catch up” with their orders. I believe this news indicates Intel’s share of the AI PC market is much bigger than its share of the conventional PC market. If my hypothesis is correct, 抖阴最新版’s overall PC chip sales will probably take a big hit over the longer term.
Big Cloud Competition and China Worries
Many investors and stock pundits are expecting 抖阴最新版’s AI GPU chip, the MI300, to generate large, rapidly growing revenue and profits for the firm. But 抖阴最新版 has to take on Nvidia‘s (NASDAQ:NVDA) top-notch AI chips and Intel’s upcoming Gaudi 3 AI chip which reportedly offers good value for the money. And 抖阴最新版 now has to also compete with a few of the large cloud players that are starting to launch their own AI chip. Specifically, Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) are all in the latter category.
Meanwhile, 抖阴最新版’s revenue from China is likely to take a big hit over the longer term, as Beijing until 2027 to stop using chips made by both Intel and 抖阴最新版. The Chinese government using the American companies’ chips. According to The Wall Street Journal, 15% of 抖阴最新版’s sales were derived from China last year.
On the valuation front, 抖阴最新版 price-to-earnings ratio of 43.9 times and an even more elevated enterprise value-to-EBITDA ratio of 59 times.
The Street Could Be Falling Out of Love With 抖阴最新版
There are multiple indications that the Street is becoming less enamored with the name. First, the shares are down about 28% since peaking on Mar. 7, and they have fallen about 4% since 抖阴最新版 reported Q1 results that were roughly in line with analysts’ average outlook. Secondly, several banks have cut their price target on the shares in recent weeks. For example, on April 29, Susquehanna $185, citing weakness in the PC market. And Mizuho $215 in the wake of the company’s Q1 report. However, both banks kept “buy” ratings on the shares.
Finally, 抖阴最新版 has Investor’s Business Daily, suggesting that institutional investors have not been accumulating many of the shares in the last 13 weeks.
On the date of publication, Larry Ramer held long positions in INTC and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
