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There’s Too Much Optimism Around Advanced Micro Devices, Inc. (AMD) Stock Now

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Advanced Micro Devices, Inc. (NASDAQ:AMD) stock had a great run in 2016, but the stock may not be able to repeat its performance in 2017.

Advanced Micro Devices, Inc. (NASDAQ:AMD) is announcing its fiscal fourth quarter earnings at the end of the month where investors will be tuning in with interest. Why? Well, this stock had an unbelievable 2016 where the stock price rose by nearly 300%, so you can bet that investors will be looking at the guidance to see if AMD can pull off a similar feat in 2017. Buying this stock at under $1.70 a share in late 2015 was a calculated risk.

There was millions worth of negative equity on the balance sheet and bankruptcy was being touted about as a real possibility. This resulted in sentiment being at record bearish levels at the time, but AMD eventually got its act together by shoring up its balance sheet through a series of deals and strong sales from its Polaris GPUs. However, astute investors know that a large portion of AMD’s share price gains last year came from announcements on what is coming down the track – particularly in the Ryzen CPU and Vega GPU areas.

Adam Ziaja / Shutterstock.com

Adam Ziaja / Shutterstock.com

Ryzen CPU’s Will Find It Difficult to Compete With Intel Corporation (NASDAQ:INTC) Over A Four Year Period

AMD’s Ryzen CPUs are expected to go up against Intel’s core processors in the high end CPU market. Initial tests against Intel Corporation (NASDAQ:INTC)’s Core i7 6900K looked very promising last month. However, the window of opportunity here may be quite small. AMD’S Ryzen architecture is expected to remain in the market for the next four years which means it will be coming up against a host of Intel processors, since usually, new ones are launched every 15 months. Intel Corporation (NASDAQ:INTC), for example, is expected to launch a host of processors this year including the much anticipated Core i7-7700K. Whether Ryzen CPU’s can compete with these new processors over a period of more than 36 months remains to be seen.

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The Vega 10 GPU Has Really Been Talked Up, But Will It Deliver?

The real hype though, is with the Vega 10 GPU which is expected to be able to take on NVIDIA Corporation (NASDAQ:NVDA)’s GTX 1080. Again initial tests have showed that the Vega 10 GPU is faster than Nvidia’s similar offerings (maybe even including the GTX 1080Ti.) in terms of frames per second. The real key here is how AMD has really changed the landscape with how it manages memory in its graphic processing units.

In fact, Vega 10’s HBM2 (high-bandwidth memory) vastly outperforms GDDR5 which is the memory used on NVIDIA Corporation (NASDAQ:NVDA)’s Pascal architecture. Does this mean AMD has a game changer on their hands here? Tough to say, but AMD seems to have produced a big leap here in its GPU architecture. I would caution investors about the hype being generated in this space at present. We only have to go back as far as last Summer to see how NVIDIA Corporation (NASDAQ:NVDA) gained more market share when both companies launched new GPU’s (1).

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