AMD (NASDAQ: AMD) inventory fell 8% in after-market buying and selling yesterday (29 October) after the semiconductor large launched sub-par Q3 outcomes. Final 12 months’s optimistic Q3 efficiency led to a 114% acquire within the following months nevertheless it appears unlikely to take pleasure in related outcomes this time round.

The price has already declined considerably this 12 months, falling 24% from a excessive of $211 in March. Now at $159, it’s up solely 15% year-to-date.

There was a lot fanfare within the run-up to Tuesday’s outcomes, which solely provides to the ache. It loved a 7.7% increase in anticipation of a optimistic report however all these positive aspects have now been erased.

So what occurred?

At $6.82bn, income got here in solely barely greater than analyst expectations of $6.71bn. Nonetheless, it’s a 17% enhance on final 12 months’s $5.8bn.

Earnings per share (EPS) got here in on par with expectations at $0.92.

However the greatest disappointment was its forecast for the fourth quarter. Analysts now count on income to return in barely beneath earlier estimates of $7.54bn, citing provide chain constraints.

When competing with record-breaking shares like Nvidia, matching expectations merely isn’t sufficient. Shareholders wish to see corporations hitting the ball out of the park.

Regardless of 122% income development in its information centre section, weaker segments are dragging it down. In contrast to Nvidia, which focuses purely on GPUs, AMD has a extra numerous vary of merchandise. Income in its gaming section fell 69% and its embedded section was down 25%.

Nonetheless, the typical 12-month price goal sits at round $187, a 17% rise from the present price.

Why I like AMD

AMD’s one of many main semiconductor producers within the US, specialising within the design of microprocessors, graphics processors and different semiconductor options. It’s identified for competing with Intel within the CPU house and with Nvidia in GPUs, focusing on each shopper and enterprise markets.

Its Ryzen processors are extremely regarded in shopper markets, particularly amongst avid gamers, whereas its EPYC processors are aimed toward information centres. It additionally develops chips for customized {hardware}, like these within the PlayStation and Xbox consoles. Extra just lately, it’s been growing its concentrate on synthetic intelligence (AI), recognising the speedy development and demand on this space, particularly inside information centres and high-performance computing. 

Its MI collection GPUs, notably the MI200 and the newer MI300, are designed for high-performance computing and AI workloads, focusing on sectors reminiscent of research, medical, and scientific analysis. The MI300 particularly makes use of AMD’s CDNA 3 structure, particularly constructed for deep studying and large-scale information processing.

A difficult market

Apart from the fierce competitors AMD faces within the semiconductor business, there are different issues. Provide chain dangers, particularly in high-tech manufacturing, may additionally impression AMD’s operations. World semiconductor demand has seen ups and downs post-pandemic, and whereas information centre demand’s rising, the patron PC market has softened.

Like different tech shares, AMD’s share price might be risky, particularly in response to modifications in demand for semiconductors, broader financial circumstances, and aggressive pressures. One specific concern is its exceptionally excessive price-to-earnings (P/E) ratio of 198. 

All of the above components may stifle price development within the quick time period. Nonetheless, whereas it’s not the outcome I hoped for, I nonetheless like AMD’s long-term prospects. As such, I plan to carry on to my shares for now.