Why Advanced Micro Devices shares fell 25% last month

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What happened

Shares of Advanced micro-systems (NASDAQ: AMD) fell 25.3% in September 2022, according to data from S&P Global Market Intelligence. The semiconductor designer released new embedded and mobile chips last month, but the new products weren’t the reason for AMD’s stock price decline. Instead, richly valued stocks were weighed down by troublesome ripples in the US economy.

So what

The only major September news from the company itself was the aforementioned release of the updated Ryzen 7020 processors for budget-conscious laptops and the Ryzen Embedded V3000 series, introducing the Zen 3 chip architecture to the market. of the onboard. It’s a little early to judge these chips on their own merits, as they won’t hit store shelves, laptops and networking devices until later this year. However, the launches were generally welcomed with open arms by the hardware-enthusiast press. AMD’s stock certainly didn’t suffer from the dual launch, closing the launch date trading session just 0.2% lower.

No, AMD’s slouched chart has nothing to do with company news. The decline has kept pace with the stock market as a whole, amplified by the volatile nature of AMD stock. The S&P500 The stock index ended September down 9.3%, crippled by lingering inflation concerns. This basic problem was compounded by a direct order from US government officials to AMD and Nvidia (NASDAQ: NVDA)preventing the two companies from exporting artificial intelligence (AI) chips to China.

Now what

AMD shares are down 52.8% year-to-date, but don’t cry for Advanced Micro Devices investors. The stock is still up 134% in the past three years and 409% in five years, leaving the broader market far behind from a multi-year perspective.

The loss of Chinese export opportunities is of course not good news, but AMD’s business is still constrained by manufacturing shortages in the semiconductor industry. The company should therefore have no trouble finding buyers for the AI ​​chips that were destined for China, at least in the short term. And as the industry returns to full chip-building capacity over the next two years, AMD’s customer list will also have time to evolve.

With that in mind, AMD investors should appreciate this opportunity to buy the stock at a reasonable price. Whether you measure AMD’s valuation in price/earnings, price/sales or price/free cash flow ratios, the stock hasn’t been this affordable in years.

AMD normalized PE ratio data by YCharts.

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Anders Bylund holds positions at Nvidia. The Motley Fool holds posts and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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