Dj Advanced Micro Devices Inc. Stock Underperforms Tuesday When Compared To Competitors

Micron Technology, Inc. MU, a leader in the semiconductor sector, has shown resilience amid turbulent market conditions. The Boise, ID-based memory chip maker has surged by 11.4% in the past three months, outperforming the Zacks Computer – Integrated System industry and the S&P 500, which rose 9.8% and 10.6%, respectively. This solid performance prompts investors to question whether it’s the right time to buy, sell or hold Micron stock.

3-Month Price Return Performance

Industry Trends Boost Micron’s Prospects

Micron is strategically positioned to benefit from several industry trends, especially in memory and storage solutions like DRAM and NAND. With the surge of artificial intelligence (AI) applications, demand for high-performance memory has soared. Micron’s investments in advanced DRAM and 3D NAND technologies align seamlessly with this demand, enhancing its competitive edge and paving the way for stronger profitability in the long run.

The company’s focus extends beyond AI to high-growth areas such as automotive, industrial IoT and data centers. This diversification strategy minimizes its reliance on consumer electronics, which are prone to demand volatility, and supports more stable revenue streams. By catering to a broad spectrum of the tech industry, Micron ensures it maintains a pivotal role in the evolving semiconductor landscape.

Micron’s Strength in Product Portfolio and Key Partnerships

Micron’s diverse product lineup, including DRAM and NAND chips for PCs, servers and mobile devices, strengthens its market position and aids in winning significant deals. Its GDDR7 graphics memory is under testing by Advanced Micro Devices AMD and Cadence Design Systems CDNS. AMD aims to use this memory to boost gaming performance, while Cadence tests it for its GDDR7 PHY IP, showcasing Micron's relevance in cutting-edge technology.

Further bolstering its market stance, Micron’s high-bandwidth memory (HBM3E) will power NVIDIA’s NVDA upcoming AI chip, the H200, which is set to replace the highly popular H100 chip. Micron has already sold out its HBM supply for 2024 and secured substantial orders for 2025. These key partnerships underline Micron’s integral role within the tech ecosystem and highlight its growth potential.

Micron’s Financial Resilience and Positive Growth Outlook

Micron’s financial performance has rebounded impressively after facing significant challenges in late 2022 and early 2023. The company has consistently beaten the Zacks Consensus Estimate for earnings over the past four quarters, with an average surprise of 72.7%. This signals a robust turnaround and underscores Micron’s capacity to adapt and recover.

Micron Technology, Inc. Price, Consensus and EPS Surprise

Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. Quote

The outlook for fiscal 2025 and 2026 also points to continued growth, supported by Micron’s significant investments in memory technologies and a focus on high-growth markets. These strategies provide a strong foundation for long-term sustainability and performance.

Challenges Looming on the Horizon for Micron

Despite a positive outlook, Micron faces potential headwinds that could dampen its momentum. Chief among these is the risk of oversupply in the high-bandwidth memory (HBM) market. HBM chips are critical for Micron’s revenues, especially as AI and data center demand remain strong. In fiscal 2024, HBM contributed significantly to its top line, and the company anticipates billions in revenues from this segment in 2025.

However, an oversupply of HBM chips could lead to a decline in average selling prices (ASPs), pressuring profit margins. Since Micron’s growth strategy is heavily dependent on AI-driven demand for memory solutions, a sudden dip in ASPs could impact future earnings and create uncertainty around its growth trajectory.

Conclusion: Hold MU Stock for Now

Micron’s solid market positioning, diversified product lineup and strong partnerships underscore its growth potential. However, near-term risks, including the potential for HBM oversupply and pricing pressures, suggest caution.

Given the balance between its robust fundamentals and these looming challenges, holding Micron stock appears to be the most prudent move for now. Investors should watch for developments in the memory market to reassess their positions on this Zacks Rank #3 (Hold) stock as conditions evolve. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Santa Clara, California-based Advanced Micro Devices, Inc. produces semiconductor products and devices. Valued at $240.1 billion by market cap, the company offers products such as microprocessors, embedded microprocessors, chipsets, graphics, video and multimedia products and supplies it to third-party foundries, as well as provides assembling, testing, and packaging services.

Shares of this semiconductor giant have underperformed the broader market considerably over the past year. AMD has gained 24.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 35.9%. In 2024, AMD stock is down marginally, compared to the SPX’s 25.8% rise on a YTD basis.

Narrowing the focus, AMD’s underperformance looks more pronounced compared to the iShares Semiconductor ETF . The exchange-traded fund has gained about 36.8% over the past year. Moreover, the ETF’s 17.5% gains on a YTD basis outshine the stock’s losses over the same time frame.

Investors are feeling apprehensive about AMD's performance in the global AI market, due to concerns about its ability to capture a significant market share amidst a competitive supply landscape. AMD's management has set ambitious targets for the growth of its data center GPU segment in the AI accelerator market. However, the company's decision to only slightly raise revenue guidance for its data center GPU segment to $5 billion for 2024 has left some investors uncertain about the current momentum of its AI business.

On Oct. 29, AMD shares closed up more than 3% after reporting its Q3 results. Its adjusted EPS of $0.92 beat Wall Street expectations of $0.91. The company’s revenue was $6.8 billion, surpassing Wall Street forecasts of $6.7 billion. For Q4, AMD expects revenue to be between $7.2 billion and $7.8 billion.

For the current fiscal year, ending in December, analysts expect AMD’s EPS to grow 27.1% to $2.53 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.

Among the 38 analysts covering AMD stock, the consensus is a “Strong Buy.” That’s based on 31 “Strong Buy” ratings, one “Moderate Buy,” and six “Holds.”

The configuration has been consistent over the past three months.

On Nov. 6, Phillip Securities analyst Jonathan Woo maintained a “Buy” rating on AMD with a price target of $170, implying a potential upside of 15.4% from current levels.

The mean price target of $190.81 represents a 29.5% premium to AMD’s current price levels. The Street-high price target of $250 suggests an ambitious upside potential of 69.7%.

On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Chip stocks including Nvidia Corp , Broadcom Inc , Intel Corp , Arm Holdings plc , Advanced Micro Devices, Inc Credo Technology Group Holding , Lattice Semiconductor Corp , Microchip Technology Inc , Marvell Technology, Inc , MACOM Technology Solutions Holdings , Micron Technology, Inc , Qualcomm Inc , Qorvo, Inc , United Microelectronics Corp are trading lower Monday in sympathy with contract chipmaker Taiwan Semiconductor Manufacturing Co .

Taiwan Semiconductor stock took a hit after the U.S. Department of Commerce instructed the chipmaker to cease supplying China with sophisticated chips—of 7 nanometers or more advanced designs—that support AI and graphics processing capabilities.

The U.S. move sent jitters across the sector, anticipating further actions from President-elect Donald Trump’s administration, which had previously attacked the U.S. Chips Act and Taiwan, the hometown of Taiwan Semiconductor.

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Taiwan Semiconductor is a crucial supplier to tech giants like Apple Inc and Nvidia.

The semiconductor stocks also got a hit from Edgewater Research analysts, flagging Monolithic Power Systems , which faced a significant setback and sent its stock plunging on Monday.

The analysts noted Monolithic’s allocation to Nvidia’s Blackwell GPUs is in jeopardy due to performance problems with its Power Management ICs.

The analysts highlighted that Japanese company Renesas and German firm Infineon have stepped in, receiving rush orders, potentially replacing Monolithic in Nvidia’s B200 and GB200 SKUs.

Edgewater expressed concern that supply chain partners perceived Monolithic’s temporary solution as a stopgap measure rather than a complete fix.

Investors can gain exposure to semiconductor stocks through VanEck Semiconductor ETF and iShares Semiconductor ETF .

Price Action: At the last check on Monday, NVDA stock was trading lower by 1.67% to $145.19, INTC was down 4.16%, and ARM was down 4.07%.

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