AMD stock slides as Q3 results miss analyst expectations. Should I sell?

A highly-anticipated Q3 earnings call has left shareholders disappointed as AMD stock dipped in after-hours trading. Our writer considers his position.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Concept of two young professional men looking at a screen in a technological data centre

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

AMD (NASDAQ: AMD) stock fell 8% in after-market trading yesterday (29 October) after the semiconductor giant released sub-par Q3 results. Last year’s positive Q3 performance led to a 114% gain in the following months but it looks unlikely to enjoy similar results this time around.

The price has already declined significantly this year, falling 24% from a high of $211 in March. Now at $159, it’s up only 15% year-to-date.

There was much fanfare in the run-up to Tuesday’s results, which only adds to the pain. It enjoyed a 7.7% boost in anticipation of a positive report but all those gains have now been erased.

Should you invest £1,000 in Henry Boot Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henry Boot Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Advanced Micro Devices PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

So what happened?

At $6.82bn, revenue came in only slightly higher than analyst expectations of $6.71bn. Still, it’s a 17% increase on last year’s $5.8bn.

Earnings per share (EPS) came in on par with expectations at $0.92.

But the biggest disappointment was its forecast for the fourth quarter. Analysts now expect revenue to come in slightly below previous estimates of $7.54bn, citing supply chain constraints.

When competing with record-breaking stocks like Nvidia, matching expectations simply isn’t enough. Shareholders want to see companies hitting the ball out of the park.

Despite 122% revenue growth in its data centre segment, weaker segments are dragging it down. Unlike Nvidia, which focuses purely on GPUs, AMD has a more diverse range of products. Revenue in its gaming segment fell 69% and its embedded segment was down 25%.

Still, the average 12-month price target sits at around $187, a 17% rise from the current price.

Why I like AMD

AMD’s one of the leading semiconductor manufacturers in the US, specialising in the design of microprocessors, graphics processors and other semiconductor solutions. It’s known for competing with Intel in the CPU space and with Nvidia in GPUs, targeting both consumer and enterprise markets.

Its Ryzen processors are highly regarded in consumer markets, especially among gamers, while its EPYC processors are aimed at data centres. It also develops chips for custom hardware, like those in the PlayStation and Xbox consoles. More recently, it’s been increasing its focus on artificial intelligence (AI), recognising the rapid growth and demand in this area, especially within data centres and high-performance computing. 

Its MI series GPUs, particularly the MI200 and the newer MI300, are designed for high-performance computing and AI workloads, targeting sectors such as research, medical, and scientific analysis. The MI300 in particular uses AMD’s CDNA 3 architecture, specifically built for deep learning and large-scale data processing.

A challenging market

Aside from the fierce competition AMD faces in the semiconductor industry, there are other concerns. Supply chain risks, especially in high-tech manufacturing, could also impact AMD’s operations. Global semiconductor demand has seen ups and downs post-pandemic, and while data centre demand’s growing, the consumer PC market has softened.

Like other tech stocks, AMD’s share price can be volatile, especially in response to changes in demand for semiconductors, broader economic conditions, and competitive pressures. One particular concern is its exceptionally high price-to-earnings (P/E) ratio of 198. 

All the above factors could stifle price growth in the short term. However, while it’s not the result I was hoping for, I still like AMD’s long-term prospects. As such, I plan to hold on to my shares for now.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Hartley has positions in Advanced Micro Devices. The Motley Fool UK has recommended Advanced Micro Devices and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »