Why Advanced Micro Devices Stock Was Falling This Week

What happened

Shares of Advanced Micro Devices (NASDAQ: AMD) were trading down 12.8% week to date as of 11:51 a.m. ET Friday, according to data provided by S&P Global Market Intelligence. Overall, it was a positive week of news for AMD.

The highlight was China giving conditional approval to AMD's $35 billion deal to buy Xilinx (NASDAQ: XLNX) on Thursday. None of this was enough to satisfy a market that really hates growth stocks right now.

A lab worker examining a computer chip.

Image source: Getty Images.

So what

The addition of Xilinx is an important growth catalyst for AMD. It expands AMD's addressable market to $110 billion and will make the combined company a greater force in high-performance computing, specifically in the rapidly growing data center market.

Getting Xilinx is huge for AMD as it continues to gain share against Intel, which is still the market share leader in x86 processors. AMD had reached nearly 25% market share in the third quarter.

Xilinx makes programmable system-on-chips and field programmable gate arrays, which are used in several markets. It will extend AMD's product portfolio to artificial intelligence solutions, wireless communications, medical, audio, video, industrial, and automotive markets.

Now what

For the near term, Intel's strong results continue to reflect healthy demand in the PC market. The industry is benefiting from shortening replacement cycles and higher PC usage, but one investor thinks Intel's resurgence means it's time to sell AMD.

AMD has been here before in the early 2000s only to see Intel regain market share. Intel laid out an impressive roadmap to regain market leadership last year, so history may repeat itself, but I wouldn't underestimate CEO Lisa Su, who has orchestrated a masterful turnaround at AMD. It's possible a rising tide could lift all boats with so much opportunity in data centers and artificial intelligence solutions.

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John Ballard owns Intel. The Motley Fool owns and recommends Advanced Micro Devices and Intel. The Motley Fool recommends Xilinx and recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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