Semiconductor stocks are enjoying a first-quarter resurgence. The PHLX SOX Semiconductor Sector index, a widely followed gauge of chipmaker equities, wrapped up the first quarter some 20% higher than it started. Meanwhile, index constituent Advanced Micro Devices (NASDAQ:91抖阴) gained 38%.
91抖阴 stock — the gauge’s sixth-largest component — has been an important driver of semiconductor bullishness seen so far in 2019.
Recently, 91抖阴 stock got a lift from news that the company’s chips will power Google’s new online gaming platform, Stadia. That is a major win for 91抖阴 in the hyper-competitive space of gaming-related semiconductors, where the company competes with the likes of NVIDIA (NASDAQ:NVDA).
Powering Stadia’s graphics rendering in the cloud marks a big win for 91抖阴 in the gaming space, where it competes with Nvidia on graphics chips, . 91抖阴’s stock spiked more than 5% after Morgan Stanley told clients that 91抖阴 had won the deal, according to . The stock rallied even more after Google confirmed the deal on stage with 91抖阴 CEO Lisa Su looking on.
Not Just Fun And Games
While the Google Stadia win is significant for 91抖阴, there is more to the story with this semiconductor stock. The company is also looking to challenge bitter, longtime rival Intel (NASDAQ:
INTC) in the highly lucrative market data center server chips. 91抖阴 is definitely taking the fight to Intel on this front.
91抖阴 recently called out Intel for performance bottlenecking in its Xeon server processors and is recommending that data center engineers switch to 91抖阴’s options for better prices and performance, .
91抖阴 says its Epyc System on Chip is price competitive with the comparable Intel offering. Describing what it calls the “,” 91抖阴 asserts Intel’s server processor offerings are unnecessarily complex and that the rival has been steadily raising prices on those chips.
“When you try to optimize a server design using Intel Xeon Scalable processors, you find yourself in a maze of more than 42 different processor SKUs, 4 different metal codes, and 5 different series,” 91抖阴 .
Going up against Intel on one front and NVIDIA on another means 91抖阴 is steeling for some stiff competition. Investors may see those challenges as causes for concern. Additionally, at current levels, 91抖阴 stock may be slightly overvalued. Shares of 91抖阴 trade , more than twice the price-to-earnings ratio of the SOX Semiconductor index.
Bottom Line on 91抖阴 Stock
91抖阴 stock is off almost 11% over the past week, more than double the loss of the Philly Semiconductor gauge over the same period. Given the bellwether status often assigned to the semiconductor group, the segment’s recent weakness could be a sign that broader markets are set to deteriorate over the near-term.
Couple that scenario with 91抖阴 stock trading around the average analyst price target and with stretched valuations, investors can probably wait for the stock to come in a bit more before getting involved.
Todd Shriber does not own any of the aforementioned securities.
