Advanced Micro Devices (NASDAQ: AMD) is a leading semiconductor producer that makes microprocessors for a variety of computing products, including personal desktop and notebook computers, servers, gaming consoles, and other consumer electronics. With the drop in stock price an investor always wonders if this makes a good buying opportunity. I have looked at the stock and the immediate future does not make me want to invest with this company right now.
Lowering Expectations
If you have watched the charts on this company you will see the drop in price after the company cut its revenue forecast for the second quarter. As with most other companies that are either down-forecasting or not meeting analyst's projections, we are getting the same feedback:
- Weaker consumer demands
- Sluggish economic growth in China
- Worsening instability of the European economy
Besides not meeting projections, it also announced an 11% drop in sales
AMD is not the first company to not meet expectations, but why did the company drop so far? Was this an over reaction? It is not like the markets have been bullish and this is the only company that has had to back peddle. Well, previously the company announced that sales would increase the second quarter by 3%. The 11% drop instead was a huge difference. It is little wonder that the stock would drop 10%+ when projections were missed so much.
One reason for the lower sales the lower demand in PCs. People are buying tablets and the tablet manufacturers tend to be in bed with its major competitor Intel (NASDAQ: INTL). AMD hasn't cut its prices and the consequence of this has been lost market share to Intel. It is a hard environment right now for the company. PCs are becoming less because of the mobile technology fad and the macro-economic environment is not favorable to consumer spending right now.
NVIDIA Gobbles Up Market Share
With its expected 11 percent drop in sales, another competitor looms on the horizon to claim its spoils-NVIDIA (NASDAQ: NVDA). These two have battled in the graphic processing market and account for almost 100% of sales. They provide graphic acceleration to PCs so that programs that are "graphic intense" will operate smoothly. Systematically it seems like NVIDIA is extracting market share in numerous ways from AMD.
- It recently secured multiple deals with Apple (NASDAQ: AAPL) with NVIDIA chips will be in the next-gen MacBook Pro.
- The Tegra 3 processor from NVIDIA will be used in Microsoft's (NASDAQ: MSFT) new tablet- Surface.
- Google (NASDAQ: GOOG) will also use the Tegra 3 processor in its new $199 Nexus 7 tablet.
Surface is expected to make waves within the tech industry. Rumors abound that when Amazon (NASDAQ: AMZN) comes out with its next tablet, NVIDIA will also be there. Where is Advanced Micro Devices? AMD is declining while NVIDIA inches its way up. Is this a fore-shadow of the future?
I just don't see Advanced Micro Devices as a place I want to put my money right now.
