U.S. restrictions on China cause AMD shares to drop, facing competition and revenue declines.

From Nasdaq: 2024-07-19 09:46:00

Advanced Micro Devices (AMD) shares dropped over 14% due to U.S. plan to tighten chip export restrictions to China. Shares declined 10.2% on Jul 17 and 2.3% on Jul 18. Other chipmakers like NVIDIA, Micron, and Marvell also saw declines. Marvell has the most exposure to China, generating 45% of total revenues.

AMD faces stiff competition from NVIDIA in the AI chip market. Investor confidence is weakening due to macroeconomic challenges and upcoming elections. AMD’s near-term prospects are affected by declines in Embedded and Gaming segment revenues. The company expects second-quarter 2024 revenues to be $5.7 billion, with a growth of approximately 6%.

Despite near-term challenges, AMD’s long-term prospects remain positive due to robust spending on AI chips. Revenues from AI semiconductors are expected to grow significantly. Recent portfolio expansions and acquisitions are helping AMD strengthen its presence in the data center and AI-enabled consumer PC markets. However, AMD stock is currently overvalued compared to industry standards.

Investors are cautious about AMD’s future growth potential as it faces competition and segment revenue declines. With a Zacks Rank #3 (Hold), it may be wise to wait for a better entry point. Despite short-term challenges, AMD’s long-term growth prospects in the AI and data center markets appear promising. The infrastructure sector is poised for significant growth, with the potential for companies to thrive in the U.S. infrastructure rebuilding boom. Trillions of dollars will be invested, presenting opportunities for growth-focused investors.



Read more at Nasdaq: Do More U.S. Restrictions on China Make AMD a Risky Bet?