Why AMD Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled chip maker AMD (NYSE: AMD  )  sank 14% today after its preliminary third-quarter results disappointed Wall Street.

So what: AMD is just the latest in a string of PC component manufacturers that have been hurt by a weak economic environment, as well as a rapid shift toward smartphones and tablet computers. Today's downbeat guidance also suggests that AMD continues to struggle with market-share losses to chip gorilla Intel (Nasdaq: INTC  ) , giving Wall Street little reason to be optimistic over its turnaround prospects.

Now what: Management now expects third-quarter revenue to decline 10% sequentially, much worse than its previous forecast of only a 1% drop. "I used to think that AMD would make it back to the big stage, and that the stock should be worth about $10 on that basis," Foolish tech expert Anders Bylund wrote yesterday. "Now, the risks outweigh the opportunity." Given the economic, secular, and competitive headwinds working against AMD, it's tough not to agree.

Interested in more info on AMD? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel. Motley Fool newsletter services recommend Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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