AMD Stock Forecast: Is It a Buy Right Now?
If you are the type of person who does your holiday shopping last minute, then you might want to be careful this year. It might be harder get your hands on popular electronics in 2021 when compared to previous years. The current global chip shortage is impacting many companies, however, one in particular is set to benefit from this demand. Let’s look at the AMD stock forecast.
This chip shortage is the result of a perfect storm of COVID-19, supply chain issues, and increased demand. In 2020, COVID-19 forced people to quarantine while also shutting down major factories at the same time. Due to these factory shutdowns, technology companies were forced to build fewer products than normal and thus ordered fewer chips. At the same time, consumers stocked up on new tech to bolster their work-from-home accommodations. This resulted in huge demand for computer chips but a limited supply.
While this presents a massive problem for companies whose products require chips, it’s actually a big opportunity for chipmakers. If chip manufacturers can ramp up their supply of chips then they will be greeted by tons of companies waiting with their checkbooks open.
AMD stock forecast is one of the world’s leading chip producers. It also on my list of 4 best microchip stocks to buy.
Let’s take a look at an AMD stock forecast and find out.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
AMD Stock Forecast
What Does AMD Do?
Advanced Micro Devices (Nasdaq: AMD) is an American semiconductor company. It specializes in manufacturing chips used in computer processing. Aside from chips, AMD makes graphics processors, motherboard chipsets and flash memories. It competes with companies like Intel, Taiwan Semiconductor Manufacturing and Nvidia.
Let’s see what recent news might be impacting the AMD stock forecast price.
- Partnerhsip with Meta (AKA Facebook) – Facebook recently rebranded to “Meta” to emphasize its focus on creating the metaverse. To help create the metaverse, Meta has selected AMD as the primary chipmaker to power its data centers.
- Acquisition of Xilinx for $35 billion – This acquisition should expand AMD’s product portfolio and customer set. Executives expect these new products to immediately boost AMD’s margins, earnings per share and cash flow. The partnership will also greatly expands AMD’s total addressable market.
- Strongest product portfolio in company history – AMD recently announced in its Q3 earnings report. In this report, AMD stated that it has performance leadership in PCs, data centers and gaming.
With that said, let’s take a look at how its stock price has been moving recently.
AMD Stock Predictions
Shares are up 53% year-over-year (YoY) and this momentum is positive for an AMD stock forecast. Over the past five years, it is up an astounding 1,990%.
In 2020, the company posted total revenue of $9.76 billion. This was a 45% YoY increase from 2019. AMD stock forecast resulted in a net income of $2.49 billion in 2020, up 630% from 2019. Over the past five years, its revenue has increased by an average of 20% annually.
These numbers are certainly impressive! So does that mean you should buy AMD stock? In order to determine that, it’s important to take a look at a few upsides of investing first.
Should I Buy AMD Stock?
First off, the partnership between AMD and Meta (Facebook) is incredibly exciting. Right now, nobody really knows what to expect from the Metaverse. This is mainly because the Metaverse doesn’t technically exist right now. However, it is expected to be a digital world where people can hang out, shop and work. It should be the next evolution of the Internet.
Meta is clearly going all-in on making the Metaverse a reality. Lord only knows how much computing power it will take to power this new digital world. However, if Mark Zuckerberg is successful in creating the Metaverse, then AMD stock forecast will play a critical role in powering it.
If you’re interested in the metaverse, I’ve written about a few potential metaverse stocks to buy.
In addition to the metaverse, AMD also works with several major clients. For example, it works closely with Tesla, the leader in electric vehicles. It also helps Google, Amazon and Microsoft with data centers and cloud computing. All four of these companies have massive needs when it comes to processing power and speed. The fact that AMD is the chosen supplier for these tech giants is a testament to the quality of the product it makes.
The acquisition of Xilinx should put AMD in a position to expand to other industries. Dr. Lisa Su, CEO, recently made comments about the acquisition…
Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high-performance computing leader and partner of choice for the largest and most important technology companies in the world.
This new partnership will allow AMD to capitalize on growth opportunities in gaming, PCs, communications, automotive, aerospace and defense. Growth forecasts like these could be a big reason why AMD stock forecasts look good.
Should I Buy AMD Stock? Potential Downsides
It’s hard to imagine a future that will use fewer computer chips. Every technological advancement will require a stronger, faster and smaller computer chip. This bodes well for the chip manufacturing industry in general. However, with this AMD stock forecast, we see strong competition in this field. There is no guarantee that it will emerge as the leader in this space 5-10 years down the road.
A few of its biggest competitors are Intel, TSM and Nvidia. Notably, Intel is dropping $20 billion to build two new chip-producing factories. TSM is also spending $12 billion on a new Arizona factory. Of the four, Nvidia is currently the largest chip-maker by market capitalization. The chip manufacturing industry will be incredibly tight moving forward. AMD does not currently have plans to build new factories or expand production. This could be a reason why it might fall behind its competitors in the coming years.
Since 2020, AMD’s stock price is up almost 200%. You have to wonder if investors have already piled into AMD stock in anticipation of higher future revenues. Now, if the company falls short of these expectations, it will hurt its stock price.
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There is also a risk that supply will rise too quickly over the next few years. If this happens, it could actually outpace demand. This might result in lower profitability for chipmakers.
About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.