Advanced Micro Devices (AMD), a global semi-conductor company, has experienced turbulent times recently losing much of its market share to rivals Intel (INTC) amongst challenging times in the PC market. Over the past eleven months Advanced Micro Devices shares have declined from over $4 in August 2014 to its current valuation of less than $2, and Year-to-Date stock performance is -32.58%. Over the past three months in particular, AMD shares were in freefall, dropping 28%.
Most analysts are naturally skeptical regarding AMD stock. Over the past year, the computer and graphic sector plunged by 54 percent with a sequential decrease of 29 percent and AMD made consecutive plunged of $180 million in the past two quarters. The decline in the PC market was the biggest drop in the sector's history and AMD shares have fallen correspondingly. However, its current low share price of $1.80 provides me with some optimism for upside movement for AMD.
Divesting from the PC Market
As mentioned above, AMD is currently reeling over flagging PC demand, and demand for PCs is forecasted to decrease consistently in the upcoming years ahead.
(Figure 1)
Consequently, AMD has shifted its focus to the gaming market. On June 17, AMD launched three `next-generation` Radeon graphic processing unit (GPU) chips at the Electronic Entertainment Expo: the Radeon R9 Fury series, the Radeon R9 300 series and the Radeon R7 300 series. Microsoft (MSFT) and Sony (SNE) already utilise AMD's specifically-designed Jaguar chips for their PlayStation 4 and Xbox One consoles. Likewise, apple (AAPL) uses AMD's dual FirePro professional graphics solutions in its highly successful Mac Pros.
Like PC chips, the GPU market is currently dominated by Intel, but by shifting the focus to the gaming industry AMD hopes to gain a larger share of the market.
(Figure 2)
Gaming is fast becoming Advanced Micro Devices' key market for growth and plays a big part of its multi-year growth strategy. Deals with tech giants Apple, Microsoft and Sony, coupled with a high demand for GPUs for in-vehicle infotainment and smartphones in China, bode well for AMD's future growth. Shifting operations from the PC market to the GPU market is perhaps Advanced Micro's greatest chance of becoming profitable again.
