Barclays Slaps Advanced Micro Devices, Inc. (AMD) Stock With Reality

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

As the old saying goes, if you play with fire, sooner or later you’re going to get burned. All the recent newcomers to Advanced Micro Devices, Inc. (NASDAQ:AMD) are feeling the sting today, with AMD stock tumbling on heels of a concerning downgrade from Barclays.

Barclays Slaps Advanced Micro Devices, Inc. (AMD) Stock With Reality
Barclays Slaps Advanced Micro Devices, Inc. (AMD) Stock With Reality

Source: Shutterstock

In short, the research arm of the British bank doesn’t see — despite all the recent hype — that Advanced Micro Devices is actually gaining any market share.

Is Barclays right? Has AMD stock gained nearly 400% since the end of 2015 on nothing more than wishful thinking?

That may be an overly pessimistic way of putting it, in that Advanced Micro Devices is far better off today than it was a year ago.

On the other hand, Barclays makes a good point.

New and Improved

Advanced Micro Devices once was a powerhouse name that was fiercely competitive with Intel Corporation (NASDAQ:INTC) on the CPU (computer processor) front as well as hold its own against rival Nvidia Corporation (NASDAQ:NVDA) on the GPU (graphics processing) front. However, it slowly ceded ground in both markets as its hardware just didn’t remain as marketable as it needed to.

That has changed of late.

Largely driven by relatively new CEO Lisa Su, who took the helm in late 2014, AMD has been developing new products hoped to win back market share. Its Ryzen CPU was and still is a head-turning processor, and its new Vega GPU hardware is impressive to say the least. It was the company’s most recent GPU evolution, in fact, that delivered a bonus surprise: It’s ideally suited to help mine for cryptocurrency.

Cryptocurrencies like Bitcoin and Ethereum aren’t exactly new. But the business of “mining” them is a relatively new industry. It hasn’t been until the past few months that the right people realized that GPUs –which are capable of performing more simultaneous calculations than a CPU — are better equipped to look for the one-of-a-kind digital thread that makes up one unit of a cryptocurrency. Mining banks are now being established on a regular basis, with their organizers expected to compute their way to riches before anyone else unlocks those code “coins.”

AMD’s graphical processing units are the weapon of choice for many of those speculators.

More Lucky Timing Than Demand

The rise of digital currency mining and the launch of Ryzen and Vega have put AMD stock in a spotlight for the first time in a long time, to be sure. Barclays has a point, though: There’s still no conclusive evidence that Advanced Micro is winning back new market share on a permanent basis.