Advanced Micro Devices, Inc. (NASDAQ:AMD) stock skyrocketed by the most in 13 years today after it posted losses that weren’t as bad as expected and beat revenue estimates. Management also dropped hints about some new gaming consoles coming very soon, and their second quarter guidance was much better than analysts were expecting.
Advanced Micro Devices up nearly 40%
Shares of Advanced Micro Devices soared by more than 39% to $3.65 per share during regular trading hours today after it posted wider losses of 14 cents per share or $109 million, compared to last year’s losses of 13 cents or $102 million. Revenue tumbled 19% to $832 million, although investors were clearly pleased because the company beat estimates of 15 cents per share in losses and $819.1 million in revenue.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
Bloomberg attributes today’s crazy stock action to management’s announcement that they had licensed some of AMD’s technology to a Chinese state-backed joint venture. Tianjin Haiguang Advanced Technology Investment Co. will pay Advanced Micro Devices $293 million in exchange for “processor and system-on-chip technology and design server chips” just for China, said the media outlet.
Also guidance was strong as management expects a 15% quarter over quarter increase in revenue, plus or minus 3 percentage points, for the current quarter. This implies sales of between $931.8 million and $981.8 million, which is significantly ahead of the consensus estimate of $890.8 million.
AMD to benefit from next-generation gaming consoles
Meanwhile Forbes contributor Dave Thier pointed to comments from AMD that suggest Nintendo, Microsoft and Sony are working on new gaming consoles to be released very soon. AMD Lisa T. Su said last night that they had three big “design wins” for their semi-custom chip business, all of which are expected to start producing revenue in the second half of this year. Thier notes that Advanced Micro Devices makes the chips in the Xbox One, the Wii U and the PlayStation 4, so it makes sense that the company’s chips would go into the next-generation models.
At this point it’s unclear when the three new gaming consoles will come out, although one for sure won’t be out this year because it’s not expected to go into production until next year. For AMD investors though, the important part is the sales the company will get from the chips. Thier suggests that the PlayStation 4 and Nintendo NX will be released this year because more details about them have been leaked, while Microsoft management has kept comments about the next Xbox model vague.