How Long Would an AMD Stock Rally Last?

AMD stock rose 13.5% as the company launched three new EPYC Rome server chips to tap demand momentum in the data center market.
  • AMD stock rose 13.5% in two days, significantly outperforming the S&P 500 Index.
  • Strong demand in the data center market is driving all data center-related stocks.
  • AMD launched a new EPYC data center chips amid COVID-19 crisis.

The U.S. stock market started strong this week, and Advanced Micro Devices (NASDAQ:AMD) took center stage once again.

After becoming the S&P 500’s top performer for 2018 and 2019, AMD stock rallied 13.5% in two days, significantly outperforming the S&P 500 Index.

AMD stock rebounded Tuesday, outperforming the S&P 500 Index. I Source: YCharts

Like other stocks, AMD is benefiting from broad optimism tied to the Trump administration’s stimulus package and tentative plans to begin reopening the economy.

AMD launches new EPYC Rome server chips

Beyond overall market optimism, AMD’s stock is highly sensitive to next-generation product launches. It is these products that fueled the company’s turnaround from losses to profits.

AMD stock rose 7.8% Tuesday after the company launched three new EPYC Rome data center CPUs.

AMD is eyeing the data center market to drive future growth. It aims to double the data center segment’s revenue contribution from 15% in 2019 to 30% by 2023, according to CFO Devinder Kumar. The new data center products bring AMD a step closer to achieving its long-term revenue target.

Source: AMD Presentation

AMD flows with the data center tide

AMD’s three new EPYC CPU launches come at a time when the COVID-19 crisis is driving cloud computing, thereby increasing data center demand.

All primary data center-related stocks are surging as a significant chunk of the world population moves to the cloud. Students are adopting online education, employees are working from home, and people are shopping, gaming, and streaming online.

Cloud companies like Google and Amazon, data center providers like Digital Realty Trust and Equinix, and server chip suppliers like Nvidia and Intel haven seen a surge in demand.

AMD is looking to gain from the data center tide with its new EPYC CPUs, which are designed for hyper-converged infrastructure, commercial high-performance computing and databases.

How long will the AMD stock rally last?

AMD’s recent rally has put the stock back in the $50 range. The stock has crossed its 50-day moving average of $47.65 and is in a technical uptrend.

Historical data show that once AMD’s stock crossed the 50-day moving average, it tends to stay above it for at least three months. The stock did see small dips after its quarterly earnings release as the company’s guidance missed analysts’ estimates.

AMD stock moves above its 50-day moving average. Source: Yahoo Finance

AMD is expected to release its first-quarter earnings report on April 30. CEO Lisa Su expects the COVID-19 crisis to have a “modest” impact on revenue as strength in the data center segment partially offsets weakness in consumer demand in China. If the company maintains its full-year guidance, there could be more upside potential for the stock.

In these uncertain times, it is not wise to buy a high-growth stock like AMD near its 52-week high. However, if you already own the stock, do not rush to sell as it has the potential to make a new high amidst strong data center demand.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

Last modified: March 4, 2021 5:11 PM

Puja Tayal: Based out of India, Puja is a tech enthusiast fascinated by the endless possibilities of AI, 5G, and autonomous cars. With an interest in technology and a background in finance, she brings a good blend of comprehensive, well-researched insights into a tech company’s working. Email: puja.tayal.143@gmail.com.