Advanced Micro Devices Stock Might Be Set for Another Record Move

Advanced Micro Devices, Inc. No Longer Second Place in Chip Speed

In the 1990s, when the personal computer (PC) became an everyday item in businesses and homes, the company producing the fastest microchips to power PCs wasn’t Advanced Micro Devices, Inc. (NASDAQ:AMD).

At that time, the fastest chips were developed by Intel Corp. (NASDAQ:INTC). Meanwhile, Nvidia Corporation (NASDAQ:NVDA) was only an afterthought, making microchips for graphics.

Fast-forward a few decades and the situation has reversed. Advanced Micro Devices, Inc. has surpassed Intel Corp. as far as innovation and execution go.

Advanced Micro Devices’ fundamentals have seen stellar improvements over the last four years. This has helped drive AMD stock up to where it is now.

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The company’s first quarter of 2022 had revenue growth of 71% year-over-year and 22% sequentially to $5.9 billion. That was about 17.7% above the consensus forecast. (Source: “AMD Reports First Quarter 2022 Financial Results,” Advanced Micro Devices, Inc., May 3, 2022.)

Advanced Micro Devices reported a bottom-line beat of about 24% to $1.13 per share, representing staggering growth of 117% year-over-year and 23% sequentially.

So, while the company’s fundamentals are impressive, shares of Advanced Micro Devices, Inc. have fallen by 42% from their record $164.46 in November 2021. Advanced Micro Devices stock is down by a whopping 34% this year alone, so is it now time for investors to consider AMD stock?

As of this writing, Advanced Micro Devices, Inc. trades at just over five times its consensus 2023 revenue estimate and nearly 20 times its consensus 2023 earnings-per-share (EPS) estimate. These multiples aren’t outlandish; Advanced Micro Devices stock deserves a premium.

What the AMD Stock Charts Tell Us

Drawing the Advanced Micro Devices stock chart back to 1998, we see the technology stock sell-off that drove Advanced Micro Devices, Inc.’s shares lower from the start of 2000 to 2022.

AMD stock rallied from its bottom in late 2002 to its top in early 2006, when it again failed to break and hold at $50.00.

From 2006 to 2015, the stock failed to gain any altitude and went lower with erratic trading.

Shares of Advanced Micro Devices, Inc. finally started their major ascent from a double bottom in 2013 and 2015. This led to the breakout at the long-term resistance level of $50.00 in early 2020.

Chart courtesy of StockCharts.com

Flipping over to the AMD stock chart since the breakout and the March 2020 sell-off, we see that shares of Advanced Micro Devices, Inc. spiked in July 2020 into an accumulation channel.

What was interesting was the surfacing of a death cross pattern in April 2021.

A death cross is a bearish technical crossover that arises when the 50-day moving average breaks below the 200-day moving average. Usually, this formation leads to further price weakness, which in this case didn’t last long.

Advanced Micro Devices stock subsequently broke out in July 2021 and rose to its record high in November 2021.

Chart courtesy of StockCharts.com

AMD stock failed to hold at its record high. It steadily declined to just above $80.00 before bouncing after Advanced Micro Devices, Inc. released its first-quarter results.

Analyst Take

At this point, given the volatility and bearish sentiment toward technology stocks, Advanced Micro Devices stock could retest its 52-week low of $72.50 from May 2021.

The surfacing of another death cross pattern in March could drive shares of Advanced Micro Devices, Inc. back toward $70.00. If this holds, as was the case with AMD stock’s first death cross pattern, we could see another major rally back toward its high.