After Advanced Micro Devices, Inc. (NASDAQ: AMD ) fell steadily from the $15-level to trade at around the $10-mark in the last few days, investors should best focus on two events. First, the company's quarterly earnings results are due sometime next month. Second, Ryzen's latest mobile processor price cut is of significant importance for the company. The mobile processor has an integrated chip that will lower the overall cost of the computer system without compromising performance. The price cut on April 5 may accelerate unit sales next.
Ryzen 5 Gets Big Price Cut
As TechRadar reported, AMD cut the price of its newly-launched advanced processing unit (APU), the Ryzen 5 2400G. Major retailers include Amazon.com, Inc. (NASDAQ: AMZN ), eBuyer, and Newegg. The lower price further pressures Intel Corporation (NASDAQ: INTC ) because the i3 line-up, such as the i3-6100 runs at 3.7 GHz, compared to 3.9GHz from AMD. AMD's integrated graphics (graphic processing unit or GPU) also uses Radeon Vega technology. This GPU is more powerful than Intel's integrated chip solution. It is so advanced that games like Overwatch may run at a 4K resolution and at 30 frames per second, at maximum details.
The price cut in the 2400G will drive sales higher, thanks to the bubble in cryptocurrencies. The crypto mining pushed prices of discrete (non-integrated) GPUs from AMD and Nvidia Corporation (NASDAQ: NVDA ) by more than double the manufacturers suggested retail price. This practically locks out gamers from upgrading their PCs with the newer, more powerful cards. AMD's budget 2400G could act as a temporary buying solution for those waiting for GPU prices to fall to affordable pricing levels.
AMD's 2200G, now at a price of just $118, may prove a more popular choice. And if memory, NAND storage, and GPU prices fall, consumers may opt for an AMD-powered chipset to get the biggest bang for the buck. Right now, Intel chips power the high-end laptops sold by Dell, Apple Inc. (NASDAQ: AAPL ), Asus, and HP Inc. (NYSE: HPQ ). When CPU cycles matter less and integrated GPUs may matter more, especially for casual gaming, AMD has an edge over Intel.
If AMD is set to ruffle Intel's business, why, then is AMD underperforming compared to Intel? INTC stock is up nearly 40 percent in the last year while AMD fell nearly 30 percent. High, initial costs are scaring investors away from AMD. To grow sales, AMD must build up its inventory, spend more on marketing, and manage its product mix to minimize its direct competition against Intel. That is tricky.
Suppliers may go through a longer-than-expected qualification process that delays the release of AMD-powered systems. Intel is a more diversified firm that already accepts that desktop chip sales will decline, and it is fine with that. Intel is branching out its business in artificial intelligence and selling computing solutions for the automotive market.
AMD operates in the opposite way. It is building its market share in desktop and notebook through Ryzen, competing directly with Nvidia with Vega and Polaris, and is entering the server market with its powerful EPYC chip solution.
Advanced Micro Devices Stock Bearishness Grows
Short float on AMD stock continues to grow. At an elevated 18.08 percent of the float, bears are betting that something will go wrong on the company's turnaround plan. The bears have a good chance of profiting from a bet against AMD. Turnarounds are no guarantee, especially when the main competitor has billions available for marketing and R&D.
Still, Intel may have lots of resources but its latest product refresh is not that impressive. Plus, Stifel is a contrarian on its opinion of the two companies. It downgraded Intel citing an inferior product line up and upgraded AMD because it expects AMD to grow its market share.
Bottom Line on Advanced Micro Devices Stock
AMD's stock is down but the company is not out. Any news of market share growth while growing profit margins will give the stock a boost. Rumors of a Sony PlayStation 5, powered by an AMD chipset, would also help AMD's stock price.
As of this writing, the author owns shares in Advanced Micro Devices.
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