Why AMD Stock Fell 10.2% in August
What happened
Shares of Advanced Micro Devices (NASDAQ: AMD) fell 10.2% in August, according to data from S&P Global Market Intelligence.
August was a roller coaster of emotions for AMD investors as the company beat earnings and revenue expectations in its quarterly report but came up short in its third-quarter guidance. As a result, the company's stock began to fall from the first week of the month.
The chart below shows AMD's stock decline throughout August as investors prepared for a less-than-stellar third quarter.
So what
Technology stocks have been hit hard in 2022, with the Nasdaq-100 Technology Sector index down 34% year to date as rising inflation and fears of a recession have slowed consumer spending. AMD has been no different, with its stock down 47% in the same period. Multiple companies are grappling with similar losses as tech stocks fall out of favor with investors.
AMD shares fell 6% in after-hours trading on Aug. 2 after the company posted second-quarter results. The company reported 70% growth in revenue year over year, hitting $6.5 billion. However, its third-quarter forecasts fell below Wall Street estimates, with AMD forecasting around $6.7 billion and analysts expecting $6.81 billion. As for the whole year, AMD expects revenue to be around $26 billion.
The less-than-expected guidance overshadowed AMD's otherwise glowing quarter, as its stock continued to fall for the rest of the month. The company attributed its pessimistic forecasts to reduced PC demand. AMD CEO Lisa Su said in a conference call on Aug. 2 that the company expects PC business to decline in the "mid-teen" percentage range. Meanwhile, a week earlier, AMD's biggest competitor Intel (NASDAQ: INTC) downgraded its guidance for the market by 10%.
Now what
Despite losses in August, it's not all bad news for AMD. The company's market cap passed Intel's this year, with AMD's standing at $128.7 billion as of Sept. 7 and Intel's at $125.9 billion. Additionally, AMD said in a 2022 earnings call it had gained market share for nine consecutive quarters, having taken share from Intel.
Consequently, AMD's long-term outlook is more favorable than its stock price would have prospective investors think, especially considering how varied its business is. Despite weak PC demand, the company has seen promising growth in the gaming industry. AMD supplies semi-custom chips to Microsoft, Sony, and Valve, which allowed its gaming business to grow by 32% year over year in the second quarter to $1.7 billion. The chipmaker's data center business is also promising, with the company earning $1.05 a share on $6.55 billion in revenue for the period ending June 25, boosted by an 83% growth in data center sales.
AMD might have tumbled in August, but its stock looks like a great buy for investors in it for the long haul.
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Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Microsoft. The Motley Fool 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.
