Is the Popular Advanced Micro Devices (AMD) a Buy or Sell This Week?

Popular chip maker Advanced Micro Devices (AMD) has been ramping up its efforts for its AI chip debut. So, is the stock a buy now? Let’s discuss some key financial metrics to gauge its prospects.

With a steadfast focus on capitalizing on the immense potential of artificial intelligence (AI), Advanced Micro Devices, Inc. (AMD) has been strengthening its capabilities in developing AI chips. Acknowledging the U.S. sanctions preventing the export of an array of chips to China, the company is planning to develop AI chips specifically for the Chinese market that will comply with U.S. export controls, thereby positioning the company in a favorable spot for expansion.

Concurrently, AMD intends to elevate the production of its MI300 chip, which challenges NVIDIA Corporation (NVDA), a leader in the market.

However, the broader landscape of the global chip industry faces obstacles posed by geopolitics and apprehensions related to national security, disrupting the industry’s globalization and overall growth dynamics.

The chairman and acting CEO of memory chipmaker Yangtze Memory Technologies (YMTC) expressed that the global industry could be embarking on a “period of turmoil.”

Moreover, analytics firm Gartner projects a worrisome 11.2% decline in worldwide semiconductor revenue in 2023. Macroeconomic uncertainties may also pose imminent challenges to AMD’s performance.

Adding to the concerns, on August 15, 2023, AMD’s Chair, President, and CEO, Lisa Su, sold 75,000 company shares. This action aligns with an ongoing trend of insider selling at AMD, thereby signaling a potential lack of confidence in the company’s future performance by its executive members.

Considering these circumstances, it might be advisable to exercise caution regarding AMD stock at present. However, further analysis of AMD’s key financial metrics can offer a better understanding of the given scenario.

Advanced Micro Devices Inc.: A Fluctuating Financial Performance from 2020 to 2023

The trailing-12-month net income of AMD shows significant fluctuations and trends over the period from September 2020 to July 2023.

• Net Income experienced growth from $879 million in September 2020 to $2.49 billion by December 2020, a significant rise.
• In the first two quarters of 2021, AMD witnessed further growth in net income from $2.88 billion in March to $3.43 billion in June. However, in the latter half of 2021 (September & December), there was a drop from $3.96 billion to $3.16 billion.
• 2022 started strong, with the net income reaching $3.39 billion in March, but it varied in the subsequent quarters falling to $3.13 billion in June and dropping drastically to $1.32 billion in December.
• The first half of 2023 saw an underwhelming performance, with the net income falling drastically to $395 million in April and reaching the negative territory with -$25 million in July.

From the first value of $879 million in September 2020 to the last reported value of -$25 million in July 2023, the net income saw a substantial decrease in its performance.

The trailing-12-month revenue of AMD has shown a pattern of steady growth with some fluctuations. The company’s revenue has nearly tripled from September 2020 to July 2023, highlighting a significant rise.

Key Highlights:

• The revenue in September 2020 was around $8.65 billion, which grew significantly to reach $16.43 billion by December 2021, indicating an upward trend within a year.
• A surge could be seen in 2022, when the revenue reached its height at $23.60 billion in December 2022, demonstrating a high growth rate throughout the year.
• However, the first quarter of 2023 marked a turning point, revealing a minor dip to $23.07 billion. The decreasing trend continued through the second quarter of 2023, where the revenue was $21.88 billion.

In terms of growth rates, measured from the first value of $8.65 billion in September 2020 to the last value of $21.88 billion in July 2023, the company’s revenue increased by near to 153%. Hence, despite the recent downturn, AMD has shown substantial growth over the analyzed period. More attention should be paid to this regression in upcoming quarters to determine if it’s part of a larger declining trend or just a temporary fall.

The gross margin of AMD has exhibited an interesting trend over the last few years, experiencing fluctuations and showing an overall downward trajectory in the most recent periods:

• On September 26, 2020, the gross margin stood at 44.5%.
• There was no significant change on December 26, 2020, remaining at 44.5%.
• A minor uptick was observed on March 27, 2021, to 44.8%.
• By June 26, 2021, the gross margin had risen to 45.7% gradually.
• There was another rise on September 25, 2021, reaching 46.8%.
• The margin peaked on December 25, 2021, at 48.2%.
• The gross margin kept ascending slightly to 48.5% on March 26, 2022.
• An abrupt drop was noted by June 25, 2022, lowering to 48%.
• By September 24, 2022, a more considerable fall…