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The Chip Shortage Getting Worse Is Positive for AMD

By Neil Rozenbaum – Aug 17, 2021 at 11:00AM

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AMD might come out of this shortage stronger than when it entered.

In this video I will be going over AMD's (AMD 5.34%) recent earnings report as a refresh and talking about rising concerns over the chip shortage and why AMD might actually benefit from it. You can find the video below. 

Earnings recap

AMD reported revenue for the second quarter of $3.85 billion, up 99% year over year. Gross margin was 48%, up 4 percentage points YOY. On a non-GAAP basis, operating income was $924 million, net income was $778 million, and diluted EPS was $0.63, beating expectations of $0.54. The company also reported it had repurchased 3.2 million shares of common stock for $256 million.

For Q3, AMD expects revenue to be approximately $4.1 billion, up 46% YOY and approximately 6% quarter over quarter. For the full year, the company expects revenue growth of 60% YOY, up from the previous guidance of 50%. 

Chip shortage

At this point we have all heard about the chip shortage that is going on around the world, and unfortunately, it is not getting any better. According to research by Susquehanna Financial Group, "the gap between ordering a semiconductor and taking delivery has increased by 8 days from the previous month."

The automotive industry has expected to lose around $100 billion in sales it couldn't make because of the shortage, but with all of that, AMD could take advantage of this situation. Since the company is basically selling everything it makes, it could increase prices and still sell all of its inventory. And a surplus of inventory in the future won't happen because the world relies on semiconductors now more than ever, so having some inventory for a rainy day might actually be a good thing. 

For the full insights do watch the video below. 

*Stock prices used were the closing prices of August 16, 2021. The video was published on August 17, 2021.

Neil Rozenbaum has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices. The Motley Fool has a disclosure policyNeil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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