Advanced Micro Devices (NASDAQ:AMD) shares are not off to the kind of start that would suggest a repeat of 2020, or 2021. For example, AMD stock delivered a 150% return in 2019. (That was the year it was the top performer among the S&P 500).
So far in 2022, AMD shares are off 24%. Not looking good. To be fair, tech stocks in general are down this year as the market frets about issues like inflation, interest rates and a Covid-19 pandemic that refuses to fade away. AMD shares are currently trading for $112.65, down about 30% from their November 2021 all-time high close.
At a time when tech stocks in general are experiencing a pullback, is the current value of AMD stock a buying opportunity? Or would it be better to sit it out for a while to see how this situation is going to develop?
The company is due to report Q4 and full-year 2021 earnings after the bell on Feb. 1. That could be the catalyst that kicks off a recovery. In the meantime, here are some key factors to be watching.
AMD Stock and the Growing PC Market
AMD’s largest division continues to be Computing and Graphics. In Q3 2021, it generated revenue of $2.4 billion, accounting for 55.6% of the company’s total revenue.
The PC market had been in slow decline for the better part of a decade until the pandemic hit. Working form home, remote learning, PC gaming and online shopping resulted in a surge of PC sales. Strong growth in that sector continued in 2021. Total PC shipments for 2021 were up 14.8% from 2020, hitting their highest level since 2012. In its report on the PC market, IDC noted “we continue to believe the overall PC market has reset at a much higher level than before the pandemic.”
This spells continued growth. People who had abandoned PCs in favor of smartphones are now buying computers again.
Many of those people will upgrade to better versions. In addition, as people move back to the office after two years of hybrid and remote work, businesses are expected to spend more on replacing computers. In short, the pandemic gave the entire PC market a shot in the arm, kicking it back into growth mode for the foreseeable future. With a majority of its business coming from that PC market, AMD stock will have a tailwind.
AMD’s Ryzen 6000 Series Mobile Chips Look Solid
A quick word on AMD’s Ryzen 6000 series laptop chips. They were an award-winner at CES 2022, but failed to help AMD stock. The competition is becoming much more intense in 2022, but don’t think that AMD has suddenly lost its edge.
Apple (NASDAQ:AAPL) kicked off a generation of hybrid processors, but when it comes to Windows laptops, AMD’s Ryzen 6000 is offering a combination of performance and battery life that is tough to top.
AMD’s multi-year gains in Windows PC processor market share may slow, but don’t expect it to run out of steam altogether. A growing share of a growing market is a good place to be in.
Don’t Forget the PlayStation 5 and Xbox Series X/S
While PC processors and GPUs are AMD’s biggest line of business, its Enterprise, Embedded and Semi-Custom division reported $1.9 billion in revenue for Q3. Earlier in 2021, it was reported that the custom silicon AMD designed for the Xbox Series X/S and PlayStation 5 accounted for the “vast majority” of that division’s revenue.
As of November 2021, the PS5 and Xbox Series X had sold a combined total of over 25 million units since launch. Demand is still through the roof, with both consoles almost always sold out at retailers. Look for the PS5 and Xbox Series X to be a strong positive for AMD stock for at least the next several years.
Originally published on InvestorPlace.com