The AMD stock price has pulled back in the past few weeks after it hit a crucial resistance level of $187.13. It dropped to a low of $155 on Thursday as investors assessed the impact of Nvidia’s investment in Intel. It remains about 107% above the YTD low. So, is the company at risk?
Is AMD at risk after Nvidia’s investment in Intel?
The AMD stock price pulled back on Thursday after investors reflected on news that Nvidia had bought a $5 billion stake in Intel, the bruised semiconductor company.
Some analysts believe that the investment may help Intel improve its business and take market share from AMD. However, we believe that Intel is so behind and that it will take time to gain market share in the AI space.
Analysts believe that Nvidia has the biggest market share in the AI GPU space with a 96% share. AMD has between 6% and 10%, while Intel’s share has collapsed to nearly zero. Not many data center companies are using its GPUs in the data center space.
AMD, on the other hand, is gaining market share in the space as some companies see it as the most viable alternative to Nvidia.
China is a big risk for AMD
The most recent results showed that its data center revenue rose by 14% YoY to $3.2 billion. This growth was impacted by Donald Trump’s export control that blocked it from selling its chips to China.
AMD is highly exposed to the Chinese market, where it makes about 24% of sales. As such, the company could be at risk now that Beijing is discouraging its domestic companies from buying NVIDIA chips. While AMD was not mentioned, it is likely that it too will become a victim.
China wants to become a major player in the semiconductor space and wants domestic companies to have a leading role. As such, the country will likely add more curbs, including on AMD.
AMD’s other key challenge is that its embedded business is struggling. This business, which emerged after the Xilinx buyout, combines its embedded x86 CPUs, embedded SoCs and FPGAs, and custom silicon.
Its revenue dropped by 4% to $824 million, while its net income fell by 20% to $275 million. A closer look at its finances shows that the segment has been deteriorating in the past few years.
On the other hand, the client and gaming division did well, with its revenue rising by 69% to $3.6 billion.
Analysts expect that AMD’s revenue will jump by 27% this quarter to $8.7 billion, while its annual figure will be $33 billion, a 28% jump.
AMD still trades at a higher premium than Nvidia, with it forward price-to-earnings ratio rising to 67, higher than the sector median of 32.
AMD stock price technical analysis
Technicals suggest that the AMD stock price will likely rebound in the near term. It has formed what looks like a cup-and-handle pattern whose upper side is at $187. The ongoing pullback is part of the formation of the handle section.
The stock has also formed what looks like an inverse head-and-shoulders pattern. A look at the distance between the neckline and the head is about 60%. Measuring the same distance from the support at $187 points to more gains, potentially to $300. The bullish AMD stock price forecast will become invalid if it drops below the support at $120.
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