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Why AMD Stock Dropped Today

By Joe Tenebruso - Jan 27, 2021 at 7:21PM

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Investors apparently wanted more than the semiconductor company could deliver.

What happened 

Shares of Advanced Micro Devices (AMD 5.64%) fell 6.2% on Wednesday, following the release of the chipmaker's fourth-quarter financial results. 

So what 

AMD's revenue surged 53% year over year to $3.2 billion. That was above Wall Street's expectations of roughly $3 billion. AMD's adjusted earnings per share, meanwhile, soared 63% to $0.52. That, too, bested analysts' estimates, which had called for EPS of $0.47. 

A person is pointing to a digital stock chart that rises sharply and then falls.

Despite AMD posting strong fourth-quarter earnings figures, its shares sank on Wednesday. Image source: Getty Images.

The gains were fueled in part by strong sales of AMD's processors used in new gaming consoles, as well as those deployed by public cloud-computing service providers.

"We significantly accelerated our business in 2020, delivering record annual revenue while expanding gross margin and more than doubling net income from 2019," AMD CEO Lisa Su said in a press release. "Our 2021 financial outlook highlights the strength of our product portfolio and robust demand for high-performance computing across the PC, gaming, and data center markets." 

Now what

AMD's solid results apparently weren't enough for investors. Many shareholders were likely expecting an even stronger performance after rival Intel's earnings report showed that it was losing market share to AMD. Yet this type of profit-taking is normal, especially considering that AMD's stock price had traded near all-time highs ahead of its fourth-quarter release.

Long-term investors should focus more on AMD's bright future. The hard-charging chipmaker appears poised to continue to take share in key areas, such as the fast-growing server and gaming markets, in the years ahead. 

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