Amid escalating geo-political tensions, the Biden administration has decided to implement new restrictions on U.S. exports of semiconductor chips and chipmaking equipment to China. According to Advanced Micro Devices, Inc. (AMD), new license requirements prevent the shipment of its MI250 chips to China. While the company doesn’t see any consequent material impact, the stock has hit its 52-week low in recent trades on deteriorating investor sentiment.

Moreover, AMD lost 25.1% over the past month and 51.7% year-to-date to close the last trading session at $68.43. However, it might not be wise to scope up AMD shares right now, as it may not have bottomed out yet.

Here is what could shape AMD’s performance in the near term:

Bleak Bottom Line Performance

For the second quarter that ended June 25, 2022, AMD’s net revenue came in at $6.55 billion, up 70.1% year-over-year. However, its operating income came in at $526 million, down 36.7% year-over-year. Its net income came in at $447 million, down 37% year-over-year, while its EPS came in at $0.27, down 53.4% year-over-year.

Stretched Valuations

In terms of its forward EV/S, AMD’s 4.48x is 80.4% higher than the industry average of 2.48x. Its forward EV/EBITDA of 12.86x is 8.1% higher than the industry average of 11.90x. Also, its forward P/S of 4.28x is 75.9% higher than the industry average of 2.43x. In addition, its forward Price/Cash Flow of 16.84x is 4.2% higher than the industry average of 16.15x.  

Trading Below Moving Averages

AMD is trading below its 50-day moving average of $88.77 and its 200-day moving average of $104.16, indicating a downtrend.

POWR Ratings Reflect Bleak Prospects

AMD has an overall rating of D, equating to Sell in our proprietary POWR Rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. AMD has a C grade for Growth, consistent with its mixed financials in the last reported quarter.

In addition, it has a D grade for Stability, in sync with its beta of 1.97.

In the 93-stock Semiconductor & Wireless Chip industry, AMD is ranked #84. 

Click here for the additional POWR Ratings for AMD (Value, Momentum, Sentiment, and Quality).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

AMD has been hitting its 52-week low recently, indicating declining investor sentiment. Moreover, given the lingering supply chain issues and declining demand, the semiconductor market is expected to decline by 6% in 2023. This, along with the new chip exporting restrictions, could lead to AMD losing further. So, it may not be wise to scope up its shares now.

How Does Advanced Micro Devices, Inc. (AMD) Stack Up Against its Peers? 

While AMD has an overall POWR Rating of D, one might consider looking at its industry peers, STMicroelectronics N.V. (STM), Xperi Holding Corporation (XPER), and Broadcom Inc. (AVGO), which have an overall A (Strong Buy) rating, and United Microelectronics Corporation (UMC), which has an overall B (Buy) rating.

AMD shares were trading at $68.39 per share on Friday afternoon, down $1.11 (-1.60%). Year-to-date, AMD has declined -52.47%, versus a -21.64% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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