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AMD: Sell If You Really Believe

Aug. 02, 2021 8:31 PM ETAdvanced Micro Devices, Inc. (AMD)241 Comments
Bill Maurer profile picture
Bill Maurer


  • Revenue growth cliff has now come, excluding Xilinx.
  • Xilinx premium hits new high as deal completion nears.
  • Stock well above short-term moving average.
AMD Athlon 64 X2 CPU on blue background..
Trygve Finkelsen/iStock Editorial via Getty Images

Last week, shares of chipmaker Advanced Micro Devices (NASDAQ:AMD) were one of the street's biggest winners, soaring after the company announced its second quarter results. Not only did management announce strong top and bottom line beats, but yearly revenue

This article was written by

Bill Maurer profile picture
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (241)

ric koehler profile picture
Well stated Mr Maurer. Hopefully the AMD consolidation since you wrote until Aug 10 has washed out profit takers for now.

I recently came to your conclusion, that the deal spread makes XLNX is a cheaper way to buy into AMD. Considering splitting out some of AMD position and buying Xilinx.

Thanks. Your work is done well, as usual.
Q32020: AMD's highest q for the year.
This fool: Uh, Oh!, Q3 is coming! Just look at this chart of mine, they are gonna struggle to even beat Q42020, back when they had the ABF shortages that are now solved.
geekinasuit profile picture
@TheWangDoodle The next time around listen to the guidance and stick with it. Over the last few years, AMD has consistently guided low and beat their own guidance. I think they've perhaps disappointed a couple of times out of 20 or so, but the last few years have been beats. If Su says they will earn X then expect X plus another 10% at least. AMD long since 2013.
@geekinasuit thank you for your time and comments
Sighcopath profile picture
LATE NIGHT THOUGHTS that got me out of bed. Let me know what you think!

USA wants wafer manufacturing back in USA and has earmarked $52 Billion for technology.
TSMC has the best fabrication facilities at leading node production (5nm) and starting to build 3nm.
INTC is transitioning into a business model that includes "fabrication for hire".
NVDA wants to purchase ARM for the ARM CPU (amongst other things).
AMD is TSMC largest customer behind APPL.
INTC is rumored to be trying to compete with APPL for the entire TSMC 3nm wafer production.
AMD is entering smart phone market with Samsung (which is the second largest producer of leading edge node wafer.
INTC is rumored to be buying Global Foundries which has a wafer supply agreement with AMD at the 12nm node size.
Both AMD/XLNX merger and the NVDA/ARM purchase need China approval.

All these facts when tumbling around in my mind while I am trying to sleep! When I suddenly wake up with this solution!

What if AMD creates a "Joint Venture" with TSMC to a fabrication facility too 12nm, 7nm and 5nm wafer production factory in the USA The USA factory could be built so it could produce the 3nm production when machines become available from ALSM. AMD would get as much of the production as they wanted at a set cost basis and any additional supply (created by improved methods or materials of production would benefit TSMC not AMD). This would secure wafer supply for AMD, bring leading edge manufacturing to the USA, remove the threat to AMD wafer supply from GF if acquired by INTC and give AMD access to the wafers to actually produce the product to compete with NVDA in the server GPU space. The final part of this puzzle is that AMD has already done "joint ventures" with companies in China so not only does AMD have joint venture experience BUT .... wait for it.... AMD AND TSMC COULD CREATE ADDITIONAL JOINT VENTURES WITH CHINA COMANIES TO MAKE WAFERS EXPLICITLY FOR THE CHINA MARKET JUST AS AMD DID WITH X-86 CPU. By doing this is would also give china a reason to approve the AMD/XLNX merger quickly!

Could AMD leverage the sudden rise in share value and give TSMC a 25% stake in AMD to create the 50% (around $35 billion at todays share price) of the funding to build in the USA? This would be an almost direct attack back at the INTC buying of GF and even the new INTC fabrication business model! Your thought would be appreciated!
@Sighcopath There needs to be an advantage for TSMC and I don't see them willing to bet on a winning horse and risking anything. Samsung would be a better match for AMD actually. Their Arm cpus will utilize Radeon technology to take on AAPL in smartphones and also to differentiate themselves from other Arm competitors. Samsung needed to do this because Arm home-grown gpu designs are falling behind which was why Arm agreed to be bought out by NVDA.

It's not just the upgraded gpu performance that Samsung needs. They must be worried looking at AAPL's vision of a 'seamless experience' across mobiles, tablets, laptops and desktops (iphone users will buy Macs and vice versa). They'll be hoping Windows 11 can help them do the same to a certain extent and what better way than to say that a Samsung laptop contains a custom cpu with Radeon igpu.
@Sighcopath - "LATE NIGHT THOUGHTS that got me out of bed..."

So many ideas and concerns. Let's address them.

TSMC will build a fab in Arizona. US policy will likely support and encourage such a move as TSMC has node leadership. Encouraging TSMC to transfer a portion of their technological base to America would mitigate some risk of them manufacturing exclusively in Asia. Proximal location of TSMC and INTC in Arizona has additional benefits. Cross pollination of engineers moving around between the two companies during their careers can only help technological advancement.

INTC competing with AAPL for TSMC's 3nm wafer production is not going to happen. Why would TSMC want to piss off AAPL to help INTC? INTC is essentially a competitor of TSMC more than a customer. INTC will dump TSMC as soon as their own node process is working. TSMC knows that. There's no love lost between these two companies. TSMC will humor INTC with some wafer allocation. But I'm guessing the majority of TSMC's capacity will go to AAPL and AMD rather than INTC.

INTC transitioning their business model to include "fabrication for hire" is part of Pat Gelsinger's new IDM 2.0 vision. Apparently Gelsinger intends to use silicon photonics packaging as leverage to pull it off. See link below.

https://tinyurl.com/h6s6dayx (Intel’s Trojan Horse into the Foundry Business)

INTC's biggest challenge for the new IDM 2.0 business model is their own corporate culture. As noted in the article, prior forays by INTC into similar collaborative endeavors have not gone well. So it's not just a technical problem. Culture and INTC competing with potential customers are major issues. It will be a disaster.

Meanwhile the world is not standing still. AMD is already using chiplets to separate logic from I/O. It's a step in the right direction. TSMC makes the logic chiplets (7nm) and GlobalFoundries (GF) makes various I/O chiplets (14nm). Silicon photonics is on GF's radar. See link below.

https://tinyurl.com/3cnmpxje (GF and Ayar Labs - Silicon Photonics - 5/7/2020)

The entire industry is aware of the photonics challenge. Nobody will wait for INTC to get its act together. Maybe that's why INTC is mulling a bid for GlobalFoundries (GF). It should be noted that GF is not cutting edge regarding node size. It seems likely this bid is for the silicon photonics foundry stuff.

Clearly INTC buying GF would have anti-trust issues. Imagine the mischief INTC could do by buying GF and cornering silicon photonics.

INTC could put their own product allocation at higher priority than their customers. Since foundries work closely with their customers on future designs, it would also provide INTC with valuable insight. Since INTC's customers would in most cases also be competitors, this toxic leverage would give INTC an advantage. Ultimately this domination would stifle the competition and cement the power of INTC's monopoly. Innovation would lag. We've seen it happen before. Remember when the world was stuck with expensive quad-core CPUs for a decade? Why would anyone want something similar to happen again?

Fortunately GF's CEO had indicated an IPO is a better way forward than selling out to INTC. I'm guessing a majority of industry stakeholders would also favor a GF IPO rather than GF getting captured by INTC.

https://tinyurl.com/2sp4pxzv (GlobalFoundries CEO says chipmaker sticking to 2022 IPO plan)

Collaboration is key to market health. Sony and Microsoft successfully collaborated with AMD for game consoles. AMD working with Samsung on smartphones continues that tradition. It points the way forward for the ARM ecosystem to boost GPU performance without getting captured by NVDA. Apparently NVDA doesn't collaborate or play well with others and prefers to buy ARM to dominate the ecosystem. ARM stakeholders have expressed concerns and UK anti-trust officials are taking a dim view of the buyout. It's likely other anti-trust agencies will weigh in soon with equally critical views.

Meanwhile AMD's merger with XLNX has received approvals from the US, UK, and EU. China will probably give approval too. Time will tell. Long AMD. Long XLNX.
AMD headed for it's own ARM version and shift from
PC to Cell Phones for growth.
XLNX brings 5G and wireless
Infinity Fabric for cellphone computing
CPU GPU 5G and data storage all on I.F.
Collective processing may work too once on shared network.
Samsung needs something brand new to go against Apple
Free money if you short AMD and buy XLNX. As long as deal goes through which is almost a certainty at this point.
InvestExp profile picture
@PocketPairOfDeuces Free money if you know nothing about the Chinese government :D
China does not generally block mergers, try to buy a Chinese company that's different
This is a well written article, however, AMD has already beaten the other analysts' earlier target price of $115/share for this year and it is the BEGINNING of August ... this is a BUY signal.😐
@PHILIP TINSLEY III What is the significance of BEGINNING of August?
@Mad Investor
4 month left to go and middle of summer vacation slow time
Sell in May .... see you in Sept
Bill Maurer profile picture

And it printed a $104 number this morning. If we get strong CPI / PPI data the rest of this week and the markets pull back, we could see $100.

The AMD picture has improved since I wrote this article, but we're not quite where we need to be just yet.
manpower profile picture
If you were making your living trading, I might believe you. I’m glad you are sharing technicals. However, technicals and street price guesstimates play a limited role in the value of a financial instrument. Scare tactics play a larger role. Facts from the past, corporate leadership/vision/goals/incentives, competition successes/failures/disasters are bigger than Scare tactics. Biggest factor is what market makers and their clients do in the non retail trading domain (in secret) have the most significant impact and we/you can never get that information soon enough.
@manpower he is still not an owner.
manpower profile picture
@bitterwind Correct. I am an owner of $AMD for many years. I do not like the writers that are ghost writing for others trying to drive valuations with talk, technicals and cherry picked facts.

The writer does not make a living trading financial instruments.
Thanks for the warning.

While the short term, I will likely trim my holdings until a slight pullback because of the 20% uptick. However, I strongly disagree... with your price target of $120 by end of 2023. To come up with that number you'd have to ignore quite a lot. Compare AMD's P/E to that of its competitor Nvidia, which is P/E 90. While I don't think AMD's P/E will reach that of Nvidia. In terms of just GPU performance. AMD is nipping at Nvidia's heels (and that is excluding the CPU, console segment which AMD is dominating at the moment).

Your technical analysis time frame is also too short. This is not the first time AMD has consolidated for an entire year. The last time this occurred was in 2017 and from there it ran from $12 to $50 in 2018-19. Expand your TA by 3 years and the run doesn't look that extreme. It should be that long if you're providing an end of 2023 PT. I also should note, the $4 billion buybacks weren't mentioned, YoY growth is 60% and while I agree moving averages should be taken into account, it doesn't address the financial conditions entirely. As for the XLNX premium, investors would have to ignore the upside potential of the acquisition. And given the bump AMD received when UK approved the deal, I think investors are looking forward to it.
Alpha Research profile picture
@TechGen you can't expect much from someone so shortsighted to be bearish on Tesla at 200 bucks pre-split
salyer1105 profile picture
Interesting seeing someone with no shares telling investors what to do.
Bill Maurer profile picture

Yet someone who has a position is considered biased. Go figure.
Buy mu. Sell. Amd
@sirius rocks
Hold both


MU Just breaking out have to see if it can keep it up


All Stocks are overpriced.
Sell now and Buy Gold.
ferrari2020 profile picture
@HereToWin great another market under performer with no cash flow,
good for an emergency fund only.
Bill talks down TSLA. TSLA went to the moon.

Bill talks down AMD. AMD went to the moon.
C185 profile picture
@Spike Capital
AMD was going to the moon before this article. It's in the gripes of WallStreetBets and RobinHood.


"Daily Popular Tickers Thread for August 03, 2021 - AMD | GME | TSLA"
@C185 Do you actually believe traders on WSB can move stocks over 100B market cap?
@Spike Capital WSB could not even make GME hit 1000 theres no way they could uptick AMD with more than a few %
Considering how the current environment in the semiconductor industry, I think there is much more room to climb. Sure there might be dips but the long term trend is up.
LeftyLoser,aka Useful Idiot profile picture
Sell before all that licensing money add 100% to the bottom line. Going Mobile, keep me moving ... up, you AMD doubters ... show me the money.
kwc813 profile picture
No, keep it long in your portfolio if you REALLY believe. Forget about it for 6 months at a time and go on to try to micromanage a quick killing elsewhere if you actually DO see the realistic growth potential beyond the hype.
amd is to 2021 what t mobile was to 2020.

Xilinx when merger done stock rallies another 15 percent.
smurf profile picture
AMD has a very strong cult following. Not as rabid or numerous as Tesla's, though.
03 Aug. 2021
Amd, Nvda, Tsla, Amzn, Apl ( Jobs-r.i.p.), and others… all have/ had a MAJOR ASSET- very good BOSSES with actual VISION and PLANS….
"Finally, shares have soared well above their 50-day moving average, a spot where the valuation seems a little lofty and the stock has been pressured in the past."
Valuation is changing based on the new available PE. You can't just look a the moving average of PPS.
"Finally, shares have soared well above their 50-day moving average, a spot where the valuation seems a little lofty and the stock has been pressured in the past."
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