This Is Huge for AMD Stock
For a little more than $2.00, Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is one bet that could surprise us this year. The company could hit a home run with a new technology that’s about to take off.
In business for more than three decades, chipmaker AMD has lately been losing ground to industry heavyweights like Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA). But not everything is as bad as it seems.
AMD’s largest business segment is its “computing and graphics” segment, which has received a massive blow from a shifting industry trend. This segment accounts for sales of AMD’s central processing units (CPUs) and graphics processing units (GPUs) that primarily go into PCs. However, the rise of smartphones and tablets has nearly strangled the PC market to death.
But AMD has found a new technology where it’s about to try its luck. Bigwigs like Alphabet, Microsoft, Sony, HTC, and Facebook are now fully invested in it. If smartphones are the PC-killers, then this technology is touted to be the smartphone-killer.
In case you haven’t guessed already, I’m talking about virtual reality (VR) and its sister, augmented reality (AR). (Source: “Augmented/Virtual Reality to hit $150 billion disrupting mobile by 2020,” Digi-Capital, April 2015; http://www.digi-capital.com/news/2015/04/augmentedvirtual-reality-to-hit-150-billion-disrupting-mobile-by-2020/#.VuMRAkIrLIV.)
AMD saw it coming way ahead of time. The company has already created its fastest-yet GPU chip, the “Radeon R9 Fury X2,” designed especially for VR. In fact, it is expected to be revealed this week during the Game Developers Conference. (Source: “AMD Expected to Launch Dual-GPU R9 Fury X2 Card at March 14 “Capsaicin” Event,” TechFrag, March 8, 2016.)
And it’s not just GPUs. Even AMD’s CPUs might receive a boost from this technology. Let me explain…
For a VR-compatible system, not only will you need a high-definition graphics processing unit (GPU) but also a stronger central processing unit (CPU).
Take, for instance, Facebook’s “Oculus Rift,” which requires a high-functioning PC—with both a compatible CPU and GPU—in order for you to be able to fully enjoy the VR experience. (Source: “AMD reveals which processors you’ll need for VR gaming on Oculus Rift and HTC Vive,” PC World, February 11, 2016.)
Simply put, AMD has just found a new high-growth industry where it is about to try its luck. The gaming world is already abuzz, anxious to get their hands on the new chip.
Take note that AMD’s GPU chips have already been popular in the gaming industry, in both PCs and consoles. VR technologies are simply adding another layer of demand for AMD’s products.
The Bottom Line on AMD Stock
Shifting consumer tastes weighed heavily on AMD’s core business, which had traditionally served the PC industry. However, this new technology could become a game-changer for the company in the coming days.
AMD’s economic moat is not only speed and efficiency, but also pricing. AMD’s chips compete with rivals Intel and NVIDIA by employing cut-throat margins. The cheaper yet faster GPUs for VR, particularly the “Fury X2,” will likely drive strong demand from VR-gaming enthusiasts.
In a nutshell, AMD stock is one bet I’m ready to put my money on as the VR industry takes off.