The article was written by Jacob Saphir, a Financial Analyst at I Know First.

AMD Stock Analysis

“The high-tech business, the semiconductor business, it’s very competitive. You’re out there every day slugging it out, no different from players slugging it out on the ice.” Henry Samueli

Summary:

• AMD benefiting from the popularity of Cloud Computing Services
• Signed agreements with Alibaba and Google to be a supplier of Graphics Processing Units
• AMD stock rose and the market sees the company’s potential in regaining market share from its competitors

Background:

Advanced Micro Devices, Inc. (NASDAQ: AMD) is semiconductor company.  The company was founded in 1969 and headquartered in Sunnyvale, California.  The company’s 2 business segments are: computing solutions and graphics and visual solutions.  In the computing solutions, AMD competes notably with in a duopoly market for the x-86 microprocessor.  Besides computing solutions, the company is also among the largest graphics chips maker in its graphics and visual solutions business segment.  The company constantly finds itself in stiff competition with its other larger competitors: Intel and NVIDIA.  However, over the years AMD has made strides to improve itself.  I Know First has been a proponent in forecasting a bullish future for the company.  AMD signed a crucial deal in the past two months with Alibaba and Google.  Contract signing is a reason why its stock has risen considerably and could result in future revenue increase.

Alibaba is China’s largest e-commerce company with over $230 billion in market cap.  Dubbed as the Amazon of China, the company has expanded from e-commerce retailer to cloud computing services, Alibaba Cloud.  Cloud computing enables users to access stored information or software saved in remote servers hosted on the internet.  The service has become such a success that executive chairman of Alibaba, Jack Ma, claimed 35% of total websites in China are hosted from Alibaba Cloud.  Such a demand requires significant investment in Graphics Processing Unit (GPU) to process their data centers.  Cloud service has benefited others.  On October 14, 2016, AMD signed an agreement with Alibaba to be a supplier of its AMD Radeon Pro Chips for Alibaba’s cloud platform.  To be a major supplier for this company is a huge gain for AMD.  This signing could convince the general public in AMD’s ability in providing high-end processors that can rival NVIDIA.  This could result in AMD gaining market share from NVIDIA. As encouraging as the news was to its shareholders, the stock continued to increase even further as AMD signed another high profile client.

Google Partnership:

As the world’s dominant search engine, Google too is also looking to support its fastest growing division: cloud computing service.  Although arriving late to the cloud platform, the company is aggressively investing its resources to increase its market share from its rivals Microsoft and Amazon.  On November 15, 2016, AMD announced in its press release that it has reached an agreement to supply Google starting in 2017, “Radeon-based AMD FirePro™ S9300 x2 Server GPUs, to help accelerate Google Compute Engine and Google Cloud Machine Learning services.”  Such a signing is projected to boost AMD’s earnings and revenue in the GPU market.  As the market see the signings potential in revenue and earnings, AMD’s stock increased by 30% within days. These signings and potential increase in market share against NVIDIA in the GPU market, not only benefits the company financially, but also to increase AMD’s brand recognition.  Perhaps these signing could also influence customers to see AMD as a more viable competitor to Intel in microprocessors.

Conclusion:

We are maintaining a bullish forecast of the stock.  I Know First’s algorithm forecast the stock as a potential long-term investment.

Past I Know First Forecast Successes With AMD:

In such as the one dated on July 3, 2016, the algorithm accurately forecasted a bullish signal for AMD.  Close to a 5 month time span, the stock increased by over 70%.

The algorithm not only forecasted a bullish signal in its past, but also a bearish.  In one example, the algorithm accurately forecasted a bearish signal for AMD on May 29, 2014.  In a 1 year time span, the stock decreased by 43%.

Below is the latest forecast I Know First algorithm released on November 27, 2016.  If we were to compare the forecast back in January 21, 2015, we can see both forecasts rate AMD, Inc. as a buy.  If the previous forecast accurately predicted the stock would increase and it did by 27%, the latest forecast below could indicate future increase in the stock’s value.

The forecast is color-coded, where green indicates a bullish signal while red indicates a bearish signal. Brighter greens signify that the algorithm is very bullish as it does at the top of this forecast. The signal is the number flush right in the middle of the box and the predicted direction (not a specific number or target price) for that asset, while the predictability is the historical correlation between the prediction and the actual market movements. Thus, the signal represents the forecasted strength of the prediction, while the predictability represents the level of confidence.