Stock of the Week: Advanced Micro Devices

AMD gives Intel a run for its money

Andrew Willis 26 April, 2021 | 4:28AM
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Andrew Willis: Last week, we talked about electric air craft company Intel Corp. This week, we want to talk about a high-tech stock that’s undervalued, has exemplary capital allocation and has managed to build an economic moat, or competitive advantage. Meet Advanced Micro Devices (AMD).

We checked in on AMD recently after seeing its rival, Intel, make some… creative... investments – while also struggling with core manufacturing challenges, like making microscopic nodes on microchips that are smaller, to help process data faster and more efficiently.

AMD already has a 7-nanometer process in play. Sector strategist Abhinav Davuluri says that AMD now has products that are materially more competitive across all segments and that new innovative chip designs have allowed its foundry partner, Taiwan Semiconductor (TSM), to “leapfrog” Intel. This helps make a competitive moat…

AMD is looking to apply these new technologies to an increasingly wider product line with the acquisition of another semiconductor company, (Xilinx), which has us raising our moat rating to narrow from none, and adding 10 U.S. dollars to our fair value.

Lastly, investors should consider that effectively every piece of software ever intended for PCs or servers is designed for architecture that AMD or Intel chips use. And if AMD has a better chip, it may only need to compete with Taiwan Semiconductor’s other customer… Apple.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Advanced Micro Devices Inc181.61 USD-0.18Rating
Intel Corp34.49 USD2.96Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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