Can Advanced Micro Devices, Inc. Stock Stay Above $10 For Long?

Advanced Micro Devices, Inc. stock is again trading at $10 level. Can AMD stock bounce back? Can Advanced Micro Devices, Inc. Stock Stay Above $10 For Long

It was not a long time ago when Dr. Lisa Su led Advanced Micro Devices, Inc. (NASDAQ:AMD) shares were testing the $15 mark, with more than 500% returns in the last two years. The whole market, in general, was very bullish on the prospects of AMD stock but things look different now. After the post-earnings sell-off, AMD stock has largely traded sideways and is now back at the $10 mark. With AMD stock losing momentum steadily, now the question is whether AMD stock in danger of falling to single digit level? Will AMD shares manage to stay above $10 for long?

AMD stock price chart

Technical set up has not improved much.

If one has a look at the AMD stock technical chart, presently, the stock trades below its all key simple moving averages (SMA) be it the 20-day, 50-day, 100-day or even the long-term 200-day SMA. AMD stock had only recently breached its short-term 20-day SMA in a bearish move last week. Now, AMD shares are on the verge of a bearish Moving Average Convergence Divergence (MACD) crossover, which is a popular momentum indicator used by technical traders. This bearish crossover could happen as early as today, indicating that AMD stock might continue to be under pressure.

The MACD line could follow below signal line to complete a bearish signal line crossover. However, AMD stock could soon rebound after falling initially as the stock is very close to the oversold zone as per both popular indicators Relative Strength Index (RSI) and Bollinger Bands. AMD share price is just a few cents away from breaching the lower Bollinger Band to signal am oversold condition and any further weakness could land AMD stock in oversold territory. The current RSI reading of 35.36 is also very close to the generally used oversold threshold limit of 30. Add to that, AMD shares have a strong support at the $10 level, so a bounce could be around the corner.

AMD stock technical chart daily

More negative news coming in for AMD.

Jon Peddie Research has released its latest report on discrete GPU market for Q3. The findings of the report suggest bad news for the Sunnyvale, California based semiconductor company. Advanced Micro Devices' GPU rival  NVIDIA (NASDAQ:NVDA) increased its discrete GPU market share to 72.8% from 69.7% in the second quarter while AMD's share fell from 30.3% in Q2 to 27.2% in the third quarter. This was the lowest market share for the Lisa Su led chipmaker in the last 6 quarters. The report findings may further increase the bearish sentiment around the stock. AMD stock is already struggling in spite of a strong Q3 earnings performance. If things don't improve much for AMD in Q4, in which gaming and holiday season are only likely to drive GPU sales, this could have a significant impact on the company's top line. Though AMD posted record GPU revenues in Q3, the loss of market share is not a good sign and also better GPU revenues could be attributed to 29.1% Q0Q and 21.5% YoY increase in overall market due to high demand from Crypto mining and Gaming rather better performance of AMD.

Q3 2017 Discrete GPU Market Share NVIDIA vs AMD

EPYC catalyst will take some time to make significant impact for AMD.

AMD's data center offering EPYC chips are being touted as the biggest growth catalyst by the ultra bulls. And why not  considering EPYC chips had some record-setting benchmarks. Soon market leader Intel (NASDAQ:INTC) also came out with the benchmarks of its offerings pitted against EPYC. Those benchmarks suggest Intel's offerings having the edge over EPYC chips in some cases. These benchmarks need to be taken with a pinch of salt as these have not been given by independent reviewers but Intel itself and that too they come with some caveats. However, keeping this all aside, when coming to the impact of EPYC chips on the company's financials, this could take a little longer. AMD CEO, Lisa Su while answering a question about EPYC market share gains at the Credit Suisse Technology, Media and Telecom Conference stated: "I think it’s fair to say that we expect with our visibility now by the end of 2018, we should be at mid single-digit percentage and that’s very similar to the original Opteron ramps. So, it takes about, let’s call it, 4 to 5 quarters to hit that first milestone of significant market share. Then the next milestone is 10% and that takes another four quarters."  

These timelines are based on the assumption that AMD does well enough to convince many data center users to switch to EPYC which wouldn't be easy. With Qualcomm (NASDAQ:QCOM) also getting into the fray with its Centriq chips, AMD has its task cut out. The key takeaway here is that investors betting on EPYC to drive AMD stock in the near-term may have to wait for little longer. In the absence of any major catalyst in the near-term and no new big product launches to drive AMD stock, the shares could mostly sideways for some time until the emergence of any major positive development.

Can AMD stock stay afloat $10 mark?

With the technical outlook not improving as discussed above, the downward pressure on AMD may continue for a while. However, we may soon see a bounce as the shares head into oversold zone. AMD stock is likely to stay above $10 mark given the strong support at that level which has been breached only once in January this year if you go by the stock history. The inflow of negative news such as the John Peddie Research report is likely to make things difficult for AMD stock. The absence of a major catalyst to drive AMD shares in the near-term could mean that the stock will be trading sideways mostly till next earnings.

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