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AMD: Here's What I Am Doing After Another Blowout Earnings


  • AMD is no longer an "underdog", and future growth projections do not necessarily justify its current valuation. In this note, we review AMD's Q3 results and guidance.
  • Furthermore, I provide a pro-forma valuation of AMD (+Xilinx). The easy money has been made in AMD over the last six years, and future returns may look very different.
  • AMD is a decent buy at $122, however, potential investors should buy through Xilinx at $185 (a discounted proxy for AMD) (after Dr. Lisa Su's reassurances about the merger).
  • I do much more than just articles at Beating the Market: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

AMD office in Markham, Ontario, Canada.

JHVEPhoto/iStock Editorial via Getty Images


Advanced Micro Devices (NASDAQ:AMD) is probably one of the greatest turnaround stories ever, and investors have made incredible returns in this counter over the last six years. Under the leadership of Dr. Lisa Su, AMD has showcased

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Ahan Vashi profile picture

I am the Investing Group Leader at "The Quantamental Investor" - a community pursuing financial freedom via bold, active investing with proactive risk management. At TQI, we help retail investors build and preserve generational wealth in public markets. To do so, we share highly concentrated, risk-optimized model portfolios that meet investor needs across different stages of the investor lifecycle. In addition to deep fundamental research, all of our investment ideas are thoroughly vetted using a mix of quantitative, technical, and valuation analysis. Furthermore, a TQI membership includes access to our proprietary software tools and group chats. If you're interested in learning more about our community, visit: The Quantamental Investor

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Comments (79)

Ahan Vashi profile picture
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amd/spy pair has dropped from 3 to 1.5 sigma rich (underperform) ..am expecting more underperformance
12/9 close below 137.5 confirms
12/13 amd/spy pair testing 200dma on 3yr horizon which currently is about 1 sigma rich ...on absolute baisis todays close below 137.5 confirms continued underperformance
12/23 stopped out of balance of short (covered 1/2 near 140)..sell off shallow as the amd/spy pair bounced off 50 dma ..pair went from 3 sigma rich to 1 sigma rich
AMD will reach 50% market share in it's DC, HPC TAM in 24 months. That seems to be the message coming from people in the supply chain looking at what businesses are ordering one to two years out....
Diesel profile picture
What's taking it so long to approve the merger already?
Diesel profile picture
I sold some 2024 XLNX puts. Can't wait for this deal to close so that I can make the max profits.
party2998 profile picture
@Diesel which strike did you sell?
Diesel profile picture
Some at $100, some at $150 some at $200.
party2998 profile picture
@Diesel thank you!
Jim Van Meerten profile picture
Xilinx is a Top Stock to Own seekingalpha.com/...
good article.. I shorted amd (and soxx) as when measured vs the market (spy) valuations especially in case of amd are stratospheric (in terms of standard deviation literally 'off the chart)
11/23 added to short ..close below 147.89 confirms
@mmarek evans so you short an undervalued fast growing stock because it grows faster than the overvalued slow-moving s&p500 ?
@phvaessen in a word yes..("slow moving' s&p is up 42% over the last twelve months)
Since your evaluation model is proprietary, it may be opaque, but it appears that in step 3 it depends on your projection for ten years in the future of high technology. That renders it ridiculous.
@Ahan Vashi

A sincere question, since I value the BTM service tremendously.

Can you please clarify if BTM still owns NVDA?

In a previous article from September ("Nvidia: The World's Most Valuable Semiconductor Company"), you wrote "With a multi-year consolidation being the best outcome, we sold out Nvidia (long position held from 2018) from our portfolios at BTM."
Best wishes, appreciate your work.
Ahan Vashi profile picture
@Daniel koller We sold out at the start of September, bought back a few shares below $200 (a fraction of our previous position). Today, Nvidia is a part of the portfolio, but it's not a buy (or add) at this valuation.
@Ahan Vashi Thank you!

Only if possible, can you share what prompt you to buy a few shares? Since to my understanding, BTM's general view is that even at $190, NVDA is greatly overvalued.

I'm very curious since I highly appreciate you, Louis & Jared. Your service is the best service I know of.
Ahan Vashi profile picture
@Daniel koller Sometimes buying decisions are based on portfolio allocation strategies, and we wanted to have exposure to the semiconductor industry in this environment. Below $200, Nvidia offered market performance (SPY), and since we like to deploy capital using DCA plans, we started buying, expecting to buy more if the stock went down more. However, the stock just reversed and went on a crazy run-up. We won't be buying more anytime soon unless there's a deep correction (and we may choose to sell what we have if the valuation gets crazier).
Buying more on any pullback…

Fed tapers and interest rates continue to fall, as growth stock dominate….AMD, NVDA and QCOM….haha !

AMD could hit $200 by year end, should rates drop to 1.3% on the 10 yr note ….
Diesel profile picture
The discount grew even more today.
@Diesel do you see the deal closing?
Graphics cards are become too expensive even for miners. I bought an RX 6600 2 weeks ago at high price, but now believe me it's totally insane. Nice card but I can't mine and work together as I do with an NVdia RTX instead. Prices sky rocket so that I don't think people are going to buy anymore. From here I see a downfall in graphics if prices are not push it down soon.
What chip shortage? AMD books capacity years ahead to ease crunches. finance.yahoo.com/...

CNBC interview video, Lisa claimed that unlocking incremental supply is a differentiator for AMD.


Many thought Intel can easily push AMD away and grab TSMC capacities. They don't understand Lisa Su. She is so humble, doesn't like to show off, her comments in the past few quarters had already hinted that AMD has less shortage concerns. Chief Technology Officer Mark Papermaster said on the sidelines of the Web Summit conference in Lisbon, Portugal. "Everybody has had to increase their focus on the supply chain but we did so from the very beginning of the pandemic."
Sunil Shah profile picture
good attempt at a fundamental analysis at AMD
however the ratios you choose on ycharts could be far more illustrative of the crossroads AMD faces.
what is the respective rev growth?
how have gross and op margins fared between the 2?

try again
NB this is meant to be an aide, as in a constructive criticism , as you're 1/3 there to get to the crux
(its hopeless to get to the right conclusion by sheer luck)
My DCF model is also showing AMD is undervalued.
Assumptions net earnings growth = revenue growth, discount rate = 10%
using last year figures, 5year growth 25%; 5to10year 20%terminal value 25 (PE=growth) I get $125; with owners' earnings: $132
but using TTM figures and net earnings $199 and owners' earnings $196

The analyst growth expectation is far lower than the overal GPU market growth of 33% until 2028 - www.statista.com/...
The 25%-20% growth rates are a margin of safety, unless AMD would lose market share against Intel (not going to happen for the near future) and Nvidia.

AMD has no debt, a return on capital 40% (!), a better growth rate but lower PS and PE valuations than Nvidia. I agree that the growth over the last 12 month (TTM) is unsustainable but even with last year data AMD is a BUY

I own AMD, Nvidia and Xilinx since 2016 and added Xilinx at $182 :-)
Vandooman profile picture
Good article. I am long for the same reasons.

I don't often time markets but I see Intel as going sideways for at least a couple of years, They will have to put several quarters of hard numbers on the table to convince investors. I decided to dump Intel for a while, in favor of other names. Seems like there will be opportunities to get back in later. I see AMD as continuing its high growth until Intel performs. Of course Intel might not perform. I am long AMD and patient.
Coffee Fan profile picture
“Total years to stimulate”?
So … many…jokes…!
Coffee Fan profile picture
3% terminal growth rate? Why? When long term historic average S&P500 EPS growth rate is 6%? Your 3 % assumption leads to HUGE undervaluation
People are going to believe Pat Gelsinger never falls in love with any CEO.
Sighcopath profile picture
Nice article from a "INTC Bull". Surprised after this article being written that you did not take a position in AMD. On the FCF concept the XLNX merger will be accretive to the FCF. XLNX is paying total of ~$94M dividend on 11/15 to holders on 11/08 of $0.37/share. XLNX is bring LOADS of cash and little debt.

AMD as a money making machine is attracting attention from investors. Is AMD also going to attract the attention of sharks that would be interested in buying such a profitable company? One of the main reasons that AMD was never brought out (even near bankruptcy) was the X-86 agreement with INTC. What if this ~$34 billion meta verse investment by FB could be drastically reduced if FB brought AMD and then got access to the products at cost? If FB stops selling CPU to other companies would it violate the X-86 agreement with INTC? In other words would buying AMD and stop competing with INTC is the CPU market be a back door entry into access to the R&D of INTC in the X-86 market. If ARM is worth ~$50 Billion for the ARM IP for CPU how much is the X-86 IP for CPU valued at?

AMD to avoid being a take over target needs to load up on debt as a poison pill. The best way to get debt is to buy another company that makes sense in expanding into the heterogenous compute space. From doing a quick purview of potential entities to purchase to expand into the heterogenous compute space the one company that jumps out is IBM. Previous to this I had been investigating OLED companies as the next buy out as AMD moved towards CPU sales that replaced the desktop/notebook market with the head set market over the next 10 years. After listening to Dr. Su the day after the ER and her stressing the movement towards heterogenous computing the OLED growth direction took a hit.

In 2016 I identified AMD as a stock that could grow from ~$10 to over $200 by 2025. This meant that I would hold a core position in AMD until 2025 or $200, which ever came first. At $200 I will be forced to sell my position in AMD to remain true to my core investment philosophy which is to always have an exit strategy both for profits and losses. As AMD approaches the $200 sale limit I am being forced to reevaluate the investment. My goals in investing is to try and make 30% on my money in under 3 months (on small valued investments) or find those stocks that are 10X (10X or greater) growth candidate in under 10 years. The only way AMD remains a 10X candidate (by 2032 @ $2000) is to buy another company that expedites the move from a desktop/laptop CPU to a heterogenous compute company with all the benefits gained from designing heterogenous compute devices and flowing down to the minor desktop/laptop market (along with wearable head set computing for learning and data distribution.

INTC being held back by the movement to improve fabrication process is a dead horse in the race to become a heterogenous compute company. NVDA without at a minimum the ARM CPU technology completely under NVDA control will have a difficult time becoming a heterogenous compute company in 10 years. The only real threat to AMD heterogenous compute plans would be a resurgent IBM. AMD should buy IBM now to remove the competition from the 10 year out chess board!
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