AMD Stock Alert: Why You Should Sell Advanced Micro Devices Now

With modern micro devices‘ (NASDAQ:AMD) Competition is getting tougher on multiple fronts and the valuation of AMD stock is quite high. I recommend selling the shares at this point. Going forward, China’s strict restrictions on the use of its chips are also likely to weigh on the stock. Finally, there are several signs that the street is significantly less enthusiastic about the name. Given these points, I recommend investors sell AMD shares at this point.

Tougher competition from Intel

There are signs that AMD has lost large amounts of market share Intel (NASDAQ:INTC), at least in the PC market, are over.

According to a respected technology research firm Canalys, Shipments of laptops and desktop PCs with Intel chips rose 3% year over year in the fourth quarter. The number of AMD semiconductor users decreased 1% year-over-year. In the mobile CPU sector, which also includes the market for large laptops, AMD’s share fell to 19.3% in the last quarter. That’s down from 20.3% in the fourth quarter, according to the data Mercury research.

And while Mercury notes that AMD gained share in the smaller server and desktop markets in the first quarter, its share of the overall chip sector was 20%. This is well below the peak of around 24% reached in the second quarter of 2022.

Typically, tech websites that compare AMD chips to Intel’s give the preference to AMD. But interestingly, the only site that actually rated whether PCs with Intel chips are better than PCs with AMD processors came down squarely in Intel’s favor. Specifically, a report from April 15 says: Windows Central has chosen the best AI PCs in six different categories. Five of the six winners use Intel chips. And of course, most consumers and businesses buy PCs with chips rather than buying chips separately and installing them in PCs.

Intel CEO Pat Gelsinger also said last month that its customers continue to ask for more of its AI PC chips and the company is “moving quickly to catch up with their orders.” I believe this news suggests that Intel’s share of the AI ​​PC market is much larger than its share of the conventional PC market. If my hypothesis is correct, AMD’s overall PC chip sales will likely take a big hit over the longer term.

Big cloud competition and China worries

Many investors and stock experts expect AMD’s AI GPU chip, the MI300, to generate large, fast-growing sales and profits for the company. But AMD has to take it on Nvidia‘s (NASDAQ:NVDA) top-notch AI chips and Intel’s upcoming Gaudi 3 AI chip, which is said to offer good value for money. And AMD now also has to compete with some of the big cloud players who are starting to bring their own AI chip to market. Special, Amazon (NASDAQ:AMZN), alphabet (NASDAQ:GOOGNASDAQ:GOOGL) And Microsoft (NASDAQ:MSFT) all belong to the latter category.

Meanwhile, AMD’s revenue from China is likely to take a big hit in the longer term as Beijing gave its telecom companies until 2027 to stop using chips from Intel and AMD. The Chinese government also no longer wants to use the chips from US companies. Accordingly The Wall Street Journal15% of AMD’s sales came from China last year.

On the valuation front, AMD has a high forward price-to-earnings ratio of 43.9 and an even higher enterprise value to EBITDA ratio of 59.

The Street might fall in love with AMD

There are several signs that the street is less than enthusiastic about the name. First, shares have fallen about 28% since their peak on March 7, and they’ve fallen about 4% since AMD reported first-quarter results that were roughly in line with analysts’ average forecasts. Second, several banks have lowered their price target on the stock in recent weeks. For example, on April 29, Susquehanna lowered its price target on AMD stock to $185, citing weakness in the PC market. And Mizuho lowered its price target to $215 after the company’s Q1 report. However, both banks maintained their buy recommendation for the shares.

Finally, AMD has a dismal E-accumulation/distribution rating of Investor’s Business DailThis suggests that institutional investors have not accumulated many stocks over the past 13 weeks.

At the time of publication, Larry Ramer held long positions in INTC and AMZN. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publication policies.