Should You Invest in AMD?
Advanced Micro Devices Incorporation is a company based in the United States. The company designs, manufactures, and sells semiconductor chips and products around the world. The company sells GPUs found in mobile devices like computers, next-generation gaming consoles and products, and data centers under the Ryzen, Epyc, and many other brands. The company was founded in 1969.
Why You Should?
- AMD is a great growth play in an investor’s portfolio. The company continues to see rising demand in the long-term due to an adoption of more powerful computers and gaming consoles as well as the rise of larger data centers to power companies around the world. This long-term growth potential will benefit the company and its investors.
- One of the sectors that AMD has performed exceptionally well in is the data center. Data centers power companies around the world. In these locations, powerful GPUs (like the ones that AMD sells) are used for cloud computing, cloud storage, and other cloud-based services. This sector of the company’s business will continue to grow as companies modernize their operations.
- The COVID-19 pandemic further increased the growth of the company. As people stayed indoors, the demand for the company’s GPUs for gaming consoles and computers soared. In addition to this, more companies modernized their operations due to the work-from-home environment, supercharging the growth for the data centers. This benefited the company.
- Semiconductor companies, like AMD, continue to acquire new companies to improve and grow their product offerings. The company recently acquired Xilinx, a company that manufactures programable logic boards and system-on-chips. The company will continue to make acquisitions to grow its business and benefit investors.
- The company has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has benefited the company as they have been able to grow and expand the business. This has also benefited investors in the company. In the financial year of 2020, the company reported revenues of around 9.76 billion and profits of around 2.49 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 6.73 billion and profits of around 341 million.
Why You Should Not?
- The company faces tough competition in the semiconductor industry. Some of these competitors include Nvidia, Qualcomm, Marvell, Intel, and many others. This competition might hurt the company and its investors.
- The COVID-19 pandemic has also hurt the company, especially with supply chain issues. With the sky-high demand for chips during the pandemic, the company was plagued with chips and other material shortages. This meant that the company could not capitalize on all of the demand due to these issues. This also caused an increase of costs for the company.
I think that AMD is a great long-term investment due to its position as a good growth play, positive impacts from the pandemic, strong data center growth, acquisition potential, as well as rising revenues and profits. However, tough competition and negative impacts from the pandemic might hurt the company and its investors.