The past week has seen some interesting news about or interviews with executives at chip maker Advanced Micro Devices, Inc (NYSE: AMD) that might also be relevant for investors in competitors like Intel Corporation (NASDAQ: INTC) and NVIDIA Corporation (NASDAQ: NVDA). I should mention that we an open position in Advanced Micro Devices in our SmallCap Network Elite Opportunity (SCN EO) portfolio from last summer up until late January when we locked in a small loss. We got out because our SCN EO is a trading portfolio rather than a long term buy and hold portfolio and shares had sunk again after the company reported earnings – a repeat performance of what happened after the last three previous earnings reports. However, we have recently re-added Advanced Micro Devices to our SCN EO portfolio because the company continues to perform and with the technological advances in the gaming space, the company appears to be well positioned for forward growth in the quarters ahead. With that in mind, here is a look at the recent good, interesting or important new about AMD:
Canaccord Genuity Resumes Coverage While Imperial Capital Upgrades the Stock. Canaccord Genuity has resumed analyst coverage with a Buy rating and a $5.00 price target. The firm said that AMD's earnings recovery is being driven by diversified growth with a focus on operating margins. They also gave Intel Corporation a Hold rating with a $29 price target and NVIDIA Corp a Hold rating and $19 price target. In addition, Imperial analyst Ashok Kumar initiated coverage with an Outperform rating and a $5 price target. He commented:
"We are optimistic on the fundamentals of the company and the ability of the new business model to generate more consistent margins and cash flows."
AMD's Papermaster and Moshkelani Talk About Wearables, Infrastructure & Server Chips. Barron's Tiernan Ray recently sat down with Mark Papermaster, AMD's chief technology officer, and Saeid Moshkelani, a vice president overseeing what the company calls its "semi-custom" chip business, for a lengthy article. Papermaster said the company is "hard at work" on a new "core" design — a computer chip's CPU – called "K12" and he was also enthusiastic about two-in-one, or hybrid, personal computing devices - the same market that Intel has so far pursued to little effect. When Ray pointed out that the market has been skeptical of these hybrid devices, Papermaster that it is about "how you put it all together," meaning both a laptop and a tablet device, and it is an "opportunity to partner to create special experiences and great products." Moshkelani then talked about how different, as in "night and day," the company is since he joined it:
"Before, it was an engineering-driven company, a massive amount of engineering, and now it is tied into the business units. If you were to bring embedded chip design into an 8,000 person engineering team, in that prior structure, you would be lost!"
Moshkelani commented that his division's customers, such as Microsoft and Sony, foot a portion of the bill for his R&D and this results in a lower gross margin for those chips than for the standard chips the company sells, but also a very nice operating margin. He later said that in the case of the console chip business, "we pursued Xbox and PS4 unwaveringly," "cloud gaming is a rich area" and to the effect that the jury is still out on wearable technology:
"Right now, it is exciting, but it is to a large extent a fad. They have a watch that rings when your phone rings, but I already can see that on my phone, so why do I want that?"
AMD in Surrounded Computing. Papermaster also spoke with Bloomberg's Cory Johnson on the future of big tech trends – including so-called "surrounded computing:"
"It'll be smart devices. Not just your computer the literally every device around you."
He commented that surrounded computing is about being an "immersive experience" and that at AMD, they are "creating the engines underneath that have to respond to this change" and "what it means is that the world around you is going to be very computer intensive and you will need better engines going forward." In this new interactive environment, Papermaster said that its about both computing and visualization and that's what they are doing at AMD – bringing both together in one chip and bringing it together efficiently.
AMD May Outsource Its PC Chipset R&D. DigiTimes has reported that AMD is planning to outsource its PC chipset R&D to ASMedia Technology, a subsidiary of Asustek Computer, in order to save costs. Digitimes previously reported that AMD is planning to cooperate with ASMedia to integrate transmission interfaces such as SATA Express onto its next-generation platform, but the partnership may advance further with an outsourcing of the whole chipset R&D. AMD responded to the report by stating it does not comment on market speculation.
Share Performance. Advanced Micro Devices rose 2.14% to $4.29 (AMD has a 52 week trading range of $3.04 to $4.65 a share) for a market cap of $3.27 billion plus the stock is up 11.4% since the start of the year, up 9.7% over the past year and down 7.3% over the past five years. Here is a look at the long term performance of chip stocks Advanced Micro Devices, Intel Corporation and NVIDIA Corporation:
Finally, here are the latest technical charts for Advanced Micro Devices, Intel Corporation and NVIDIA Corporation:
SmallCap Network Elite Opportunity (SCN EO) has an open position in AMD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.
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