Semiconductor company Advanced Micro Devices, Inc. (AMD) operates in two segments, Computing and Graphics; and Enterprise, Embedded, and Semi-Custom.

On September 12, 2022, AMD joined PyTorch Foundation, an open source for Artificial Intelligence (AI) and Machine Learning (ML), to expand the adoption of AI tools.

Brad McCredie, corporate vice president of AMD’s Data Center and Accelerated Processing, said, “Open software is critical to advancing HPC, AI, and ML research, and we’re ready to bring our experience with open software platforms and innovation to the PyTorch foundation.”

AMD has lost 23.6% over the past month to close the last trading session at $76.51. The stock has lost 46.8% year-to-date and 28% over the past year.

Here is what could shape AMD’s performance in the near term:

Slashed Industry Growth Estimates

Amid lingering logistic disruptions and declining aggregate demand, deteriorating investor sentiment is evident from the SPDR S&P Semiconductor ETF’s (XSD) 13.2% losses over the past month.

Moreover, the World Semiconductor Trade Statistics slashed its market outlook to 13.9% in 2022, from a previous 16.3%. In 2023, it has estimated chip sales to rise a mere 4.6%, the weakest pace since 2019.

Mixed Financials

For the second quarter ended June 25, 2022, AMD’s net revenue came in at $6.55 billion, up 70.1% year-over-year. However, its operating income came in at $526 million, down 36.7% year-over-year. Its net income came in at $447 million, down 37% year-over-year, while its EPS came in at $0.27, down 53.4% year-over-year.

Stretched Valuations

In terms of its forward EV/S, AMD’s 4.61x is 77.8% higher than the industry average of 2.59x. Its forward EV/EBITDA of 13.18x is 8.2% higher than the industry average of 12.18x. Also, its forward P/S of 4.71x is 86.3% higher than the industry average of 2.53x. In addition, its forward Price/Cash Flow of 18.56x is 9.2% higher than the industry average of 17.00x.

POWR Ratings Reflect Bleak Prospects

AMD has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

AMD has a C grade for Growth, consistent with its mixed financials in the last reported quarter. In addition, it has a D grade for Stability, in sync with its beta of 1.97.

In the 94-stock Semiconductor & Wireless Chip industry, AMD is ranked #82.

Click here for the additional POWR Ratings for AMD (Value, Momentum, Sentiment, and Quality).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

AMD has registered weak momentum over the past months. It is currently trading near its 52-week low of $71.60, which it hit on July 5, 2022. And given the semiconductor industry’s grim near-term outlook, this fundamentally weak stock might plunge further. Therefore, I think AMD might be best avoided now.

How Does Advanced Micro Devices, Inc. (AMD) Stack Up Against its Peers?

While AMD has an overall POWR Rating of D, one might consider looking at its industry peers, STMicroelectronics N.V. (STM), Xperi Holding Corporation (XPER), and Broadcom Inc. (AVGO), which have an overall A (Strong Buy) rating, and Cirrus Logic, Inc. (CRUS), which has an overall B (Buy) rating.

AMD shares were trading at $76.22 per share on Monday morning, down $0.29 (-0.38%). Year-to-date, AMD has declined -47.03%, versus a -18.46% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

More...