Insights

Why Advanced Micro Devices Stock Fell 21.8% in April

What happened
Shares of Advanced Micro Devices (NASDAQ: AMD) fell 21.8% in a rough April, according to data from S&P Global Market Intelligence. The semiconductor company was hit hard in a bad market for technology stocks, especially those that cater to consumer PCs.
Semiconductors tend to be sensitive to market movements, both to the upside and the downside. In addition, higher-valued growth stocks were hit especially hard last month, as the market became increasingly worried about inflation and higher interest rates. As a high-growth semiconductor stock, AMD found itself on the wrong end of the general market mood.
Yet as Tuesday night’s earnings report showed, there’s certainly nothing wrong with AMD’s operational performance at the business level.
So what
There wasn’t too much company-specific news during April, aside from the announcement early in the month that AMD would be purchasing data center platform company Pensando for $1.9 billion. Pensando makes a customized processor and software stack that allows customers to optimize data workloads across multiple types of computing chips and architectures. It should go a long way toward bolstering AMD’s data center offerings, which consist of its EPYC processors, graphics chips (GPUs), Xilinx field-programmable gate arrays (FPGAs), and other system-on-chips (SOCs).
Still, the Pensando acquisition was not the reason for AMD’s decline last month. More likely, investors took note of high inflation and the need for the Fed to raise interest rates quickly. Again, higher rates mean future earnings are discounted more, which hurts growth stocks. Hiking rates too far could cause a recession, which wouldn’t be good for chip stocks, either.  
Moreover, in the middle of the month, analysts at Baird downgraded AMD’s prominent GPU competitor Nvidia (NASDAQ: NVDA). That followed a big downgrade from Truist for AMD, Intel (NASDAQ: INTC), as well as Nvidia. These downgrades came as channel checks from both analysts revealed slowing demand for consumer devices, such as personal computers. Obviously, PCs boomed during the pandemic due to people working from home more, so there could be a bit of a hangover as people go back to the office.
At the end of the month, Intel released an earnings report that beat expectations but disappointed in terms of second-quarter guidance, compounding fears about the PC sector. AMD is currently taking market share from Intel in both personal computing as well as data centers, but the tepid Intel forecast was extrapolated to the whole sector.
Image source: Getty Images.

Now what
As it turns out, the market might have been a bit too pessimistic in April — on AMD as well as other chip stocks. Tuesday night, AMD delivered impressive first-quarter results that blew away expectations for revenue and earnings per share (EPS). Overall revenue grew 71%, with enterprise, custom, and embedded chips skyrocketing 88%, reflecting the strong growth of the cloud. Even the computing and graphics segment, which is exposed to PCs, grew 33%, as market share gains were able to overcome some softness in the industry. EPS was up 117% to $1.13, beating expectations for $0.91.
On the conference call, CEO Lisa Su addressed the PC market concern, saying, “Although the PC market is experiencing some softness coming off multiple quarters of near-record unit shipments, our focus remains on the premium, gaming, and commercial portions of the market, where we see strong growth opportunities and expect to continue gaining overall client revenue share.”
So while the market appeared to sell AMD ahead of potential bad news and recession in April, it looks like the selling might have been overdone, given AMD’s strong ongoing results and market share gains.
Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy. –

What happened

Shares of Advanced Micro Devices (NASDAQ: AMD) fell 21.8% in a rough April, according to data from S&P Global Market Intelligence. The semiconductor company was hit hard in a bad market for technology stocks, especially those that cater to consumer PCs.

Semiconductors tend to be sensitive to market movements, both to the upside and the downside. In addition, higher-valued growth stocks were hit especially hard last month, as the market became increasingly worried about inflation and higher interest rates. As a high-growth semiconductor stock, AMD found itself on the wrong end of the general market mood.

Yet as Tuesday night’s earnings report showed, there’s certainly nothing wrong with AMD’s operational performance at the business level.

So what

There wasn’t too much company-specific news during April, aside from the announcement early in the month that AMD would be purchasing data center platform company Pensando for $1.9 billion. Pensando makes a customized processor and software stack that allows customers to optimize data workloads across multiple types of computing chips and architectures. It should go a long way toward bolstering AMD’s data center offerings, which consist of its EPYC processors, graphics chips (GPUs), Xilinx field-programmable gate arrays (FPGAs), and other system-on-chips (SOCs).

Still, the Pensando acquisition was not the reason for AMD’s decline last month. More likely, investors took note of high inflation and the need for the Fed to raise interest rates quickly. Again, higher rates mean future earnings are discounted more, which hurts growth stocks. Hiking rates too far could cause a recession, which wouldn’t be good for chip stocks, either.  

Moreover, in the middle of the month, analysts at Baird downgraded AMD’s prominent GPU competitor Nvidia (NASDAQ: NVDA). That followed a big downgrade from Truist for AMD, Intel (NASDAQ: INTC), as well as Nvidia. These downgrades came as channel checks from both analysts revealed slowing demand for consumer devices, such as personal computers. Obviously, PCs boomed during the pandemic due to people working from home more, so there could be a bit of a hangover as people go back to the office.

At the end of the month, Intel released an earnings report that beat expectations but disappointed in terms of second-quarter guidance, compounding fears about the PC sector. AMD is currently taking market share from Intel in both personal computing as well as data centers, but the tepid Intel forecast was extrapolated to the whole sector.

Image source: Getty Images.

Now what

As it turns out, the market might have been a bit too pessimistic in April — on AMD as well as other chip stocks. Tuesday night, AMD delivered impressive first-quarter results that blew away expectations for revenue and earnings per share (EPS). Overall revenue grew 71%, with enterprise, custom, and embedded chips skyrocketing 88%, reflecting the strong growth of the cloud. Even the computing and graphics segment, which is exposed to PCs, grew 33%, as market share gains were able to overcome some softness in the industry. EPS was up 117% to $1.13, beating expectations for $0.91.

On the conference call, CEO Lisa Su addressed the PC market concern, saying, “Although the PC market is experiencing some softness coming off multiple quarters of near-record unit shipments, our focus remains on the premium, gaming, and commercial portions of the market, where we see strong growth opportunities and expect to continue gaining overall client revenue share.”

So while the market appeared to sell AMD ahead of potential bad news and recession in April, it looks like the selling might have been overdone, given AMD’s strong ongoing results and market share gains.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!