What occurred

chipmaker’s shares Superior Micro Gadgets (AMD -2.54%, In keeping with knowledge offered by S&P World Market Intelligence, it rose 31.7% final month. Final month’s positive aspects introduced AMD’s year-over-year inventory efficiency beating the market by 64%.

With one other sturdy earnings report in late October, AMD gave buyers extra causes to get bullish on its prospects with an investor presentation in early November. Throughout that presentation, CEO Lisa Su introduced that Fb mother or father meta platform AMD’s EPYC processor was chosen to energy its knowledge facilities.

A lab worker holding a silicon wafer is used to make computer chips.

Picture Supply: Getty Pictures.

So what

Fb is AMD’s latest accomplice, supplying EPYC processors to prime cloud suppliers, together with Microsoft And Alphabetand server again Netflixstreaming service.

AMD’s share worth has delivered unbelievable returns for buyers over time, however a serious cause for that is the aggressive stress that AMD has positioned in the marketplace share chief. Intel (INTC -1.70%,, which has traditionally dominated the CPU market. In September, Omdia’s data-center market report confirmed that AMD had captured a “historically-best” 16% of the server CPU market. The Fb deal ought to additional improve market share for AMD.

now what

AMD’s third-quarter earnings report confirmed a powerful income development of 54% in comparison with the identical quarter final 12 months. Extra spectacular was the 134% leap in earnings per share, pushed by gross sales of higher-margin chips, similar to EPYC, Ryzen, and Radeon processors.

The one disadvantage about all of that is that the inventory’s efficiency has pushed AMD’s price-to-earnings ratio to 55 instances this 12 months’s full-year earnings estimates. Buyers are paying a excessive premium for AMD’s shares, given Intel’s plan below new CEO Pat Gelsinger to retake the throne within the chip trade, however future development is not sure.

amd chart

AMD Information by YCharts

The semiconductor trade is not proof against the slowdown or aggressive dynamics that might put stress on AMD’s income development. In such a scenario, buyers ought to regulate Intel’s transfer. Underneath Gelsinger, Chipzilla is investing in increasing its manufacturing capabilities to reclaim chip management.

The excellent news for AMD is that Intel cannot change its fortunes with the flip of a change. It should take time for Intel to catch up, which leaves AMD in improvement mode for now.

Suzanne Frey, an Alphabet government, is a member of The Motley Idiot’s board of administrators. Randy Zuckerberg, former Director of Market Growth and sister of Fb spokesperson and Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Teresa Kersten, an worker of Microsoft’s subsidiary LinkedIn, is a member of The Motley Idiot’s board of administrators. John Ballard owns shares of Microsoft and Netflix. The Motley Idiot owns and recommends shares of Superior Micro Gadgets, Alphabet (A share), Alphabet (C share), Intel, Meta Platforms, Inc., Microsoft and Netflix. The Motley Idiot recommends the next choices: lengthy January 2023 $57.50 calls on Intel and quick January 2023 $57.50 places on Intel. The Motley Idiot has a disclosure coverage.

Supply hyperlink