Advanced Micro Devices Inc. (AMD), that is headquartered in Santa Clara, California, US, is a company that produces semiconductor products and components for computers and electronic devices. AMD was founded on May 1st, 1969 by Jerry Sanders and former fellow executives of Fairchild Semiconductors. The company operates in two primary business segments: Computing and Graphics.
Their technology is used in personal computers; as well as enterprise, embedded and semi-custom, which is focused on more powerful and specialised processing. The company practically started when the semiconductor industry was forming in the 1960s, and it continues to maintain its space in the modern computing world.
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AMD initially started as a second-source manufacturer of chips from Fairchild Semiconductors and National Semiconductors. The company would receive chips from the companies and redesign them to be faster and more efficient. Although a second-source manufacturer, AMD committed to upholding US Military standards for semiconductors, a factor that quickly gave the company huge appeal at a time the emerging industry was dealing with numerous unreliable chips.
By 1971, AMD entered the RAM chip market, and a year later, it became a second-source manufacturer for Intel products, a partnership that would continue for some years until 1986. During the partnership with Intel, AMD also produced its own proprietary products. It also entered into a lucrative partnership with Siemens, exposing itself to the microcomputer business, while giving the German engineering giant a presence in the lucrative American semiconductor market.
The 1980s were a defining period for AMD. The company became a leader in R&D in the industry, with its chips going into space in 1981 aboard the spaceship Columbia. But the good days were interrupted as Japanese semiconductors were basically being ‘dumped’ in the American market in the mid-1980s and aggressive competition between ally-turned-foe, Intel, then started.
The battles with Intel dominated public headlines throughout the 1990s, but AMD soldiered on and continued to create iconic products, such as the Am386 and Am486 processors. At the time, they also bagged lucrative deals with Compaq. At the turn of the millennium, Intel drifted further ahead in the semiconductor space, but AMD remained resilient as other companies fell out of the way.
The company did this by making strategic acquisitions that allowed it to diversify into other products to protect its revenues and profits. Advanced Micro Devices, Inc., went public in 1972 and is currently listed on the NYSE where it trades under the ticker symbol AMD. It falls in the Technology sector, under the Semiconductors industry. AMD has been an active buyer and seller in the market. As of October 2020, its biggest buy to date was the 2006 acquisition of ATI Technologies for $5.4 billion, whereas its largest divestiture was the sale of its Digital TV Business to Broadcom for $142 million.
AMD Stock History
Since going public, AMD has performed two stock splits as follows: a 2-for-1 on August 23rd 1983 and a 2-for-1 on August 22nd 2000. The AMD stock has struggled in the past as the company battled to keep pace with its competition. The stock drifted higher from a split-adjusted price of circa $5 in the early 1980s to a high of circa $20 by mid-1984. It remained well below the psychological $20 barrier until the turn of the millennium when it quickly jumped to a high of circa $45 by June 2000.
The move proved to be a temporary breakout, and the stock tumbled to lows of below $5 by October 2002. In 2005, the AMD stock pushed higher to circa $20, and by February 2006, it was trading at circa $40. The subsequent tumble then sent the stock to lows of circa $2 by November 2008 as the effects of the global financial crisis hit hard. The stock then maintained a sideways trend until 2018 when it then started a multi-year uptrend that sent it to its all-time high of just above $94 in September 2020.
The stock performed particularly well in 2020 as its major rival, Intel, faced manufacturing delays for its chips during the year. As of October 2020, AMD does not currently pay dividends. This is a reflection of the tough business environment it has faced over the years. The company has only recently regained its footing, and it remains to be seen whether the company will start dividend payouts or simply hope to reward investors by higher stock valuations.
How to Trade AMD Stock
Here are the factors to consider when trading AMD stock:
- Tariffs and Trade Agreements
AMD is a global chipmaker with manufacturing facilities in various locations around the world. This means that tariffs and trade tensions between different countries can impact its margins significantly.
- Competitor Performance
AMD faces fierce competitors in all the spaces it operates in. Its rivalry with Intel in the CPU market is well known, while it also has to deal with intense competition from NVidia in the GPU sector. It is always vital to track these competitors in order to assess their performance in relation to that of AMD.
- New Product Rollout
AMD operates in a fast and dynamic space where the race is to always make faster, smaller and cheaper chips. AMD has managed to survive this space by introducing products, such as AMD Ryzen™ and AMD Radeon™. With the market moving towards smartphones and other mobile devices, a hit product in that space could inspire demand for the AMD stock.
- Lawsuits and PR
The fierce battles with Intel have always included litigation that has, at times, kept investor excitement low. But the company has always had an impressive history of corporate social responsibility as well as good employee treatment that has contributed to a positive brand image. The company has also won multiple Guinness World Records, which helps in promoting positive PR for AMD.
- Periodic Earnings Reports
AMD’s fiscal year runs from January to December, and the company releases quarterly and annual reports that paint the picture of their current and possible future business health. It is important to watch the dates when earnings are released. Positive numbers usually inspire higher stock prices, whereas negative figures can trigger lower stock prices.
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