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.
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.
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.
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.
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.
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 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.