Advanced Micro Devices (AMD -0.35%) is back in the news with CES. CEO Lisa Su delivered the keynote address for the tech-oriented convention, using the forum as an opportunity to introduce AMD's latest technology.
However, semiconductor stocks like AMD have dropped significantly amid the tech bear market. Given the lackluster performance of AMD stock, will investors care about the company's CES announcements?
Green flag: AMD's new products
Undoubtedly, Su made a splash in her convention keynote, during which she announced new products and enhancements to AMD's current lineup.
The first product announcement was the Ryzen 7040 series processor, which will be the first to include a dedicated engine for AI. The company further demonstrated that this notebook chip was 20% faster than Apple's M2 and ahead of Intel's, which does not offer a dedicated AI engine. The AI engine came from Xilinx, a supercomputing company that AMD acquired in early 2022.
Su also announced additional chips for graphics, gaming, and high-end applications, and introduced the Instinct MI300 accelerator chips for AI and supercomputing. Such advancements should keep AMD competitive with Nvidia, its archrival in the GPU market. Moreover, they should help AMD stay ahead of Intel, which has begun to try to regain the technical lead in chips over the last year.
Red flag: AMD is not performing as well as advertised
But although AMD's advancements continue, investors might be forgiven for asking whether anyone will care at the moment. The semiconductor stock is down by more than 60% from its October 2021 high, reflecting the tech bear market and concerns about sales growth.
Indeed, AMD has probably struggled more than it may want to acknowledge. In the third quarter of 2022, its revenue grew by 29% year over year (or just over $1.2 billion) to $5.6 billion. But look at the sources of revenue and you'll see that embedded revenue increased by $1.3 billion. Most of that revenue increase came because of its Xilinx acquisition, meaning overall revenue either remained flat or fell slightly when not including the recently acquired part of the business.
Additionally, AMD forecast that it would take in $5.5 billion in revenue in Q4 at the midpoint of its guidance range, an increase of approximately 14% year over year. That would amount to $700 million in additional income. If the former Xilinx embedded segment contributes another $1.3 billion, that would signify a considerable overall revenue decline for the quarter -- potentially further pressuring the stock.
Why investors should still consider AMD
Despite AMD's falling revenue, a lower stock price might present an opportunity for investors. For one thing, the semiconductor industry has always been cyclical. That means conditions in the sector will almost certainly improve eventually, which should also bring an up-cycle in AMD stock.
Moreover, this month's product releases show AMD's commitment to improving its products. As the economy recovers and the need to upgrade or benefit from AI applications becomes more critical, consumers and businesses will probably buy the upgraded chips, likely bolstering AMD stock.
This does not mean investors should ignore AMD's challenges, including the current chip industry slump, But in the end, the likelihood of this sector's eventual recovery could make now a good time to buy Advanced Micro Devices stock.
