Advanced Micro Devices, Inc. (NYSE:AMD) Slips on Grim GPU Forecasts

Advanced Micro Devices, Inc. (NYSE:AMD) ended last week with a fizzle, charting a deeper red gash. The stock dropped 5.9%, the biggest percentile red close for the past two months, on worrying news and forecasts.

IT publication Digitimes forecast a drop of 30% to 40% in discrete graphic processing units (GPUs) in the second quarter. The reason for the expected drop is the overstock of GPUs. Part of the issue, as outlined by Digitimes, is the rapid decline in interest and involvement in mining bitcoins. Big sector players, namely AMD and NVidia Corp. (NASDAQ:NVDA), chose to combat the issue by decreasing new shipments instead of lowering prices. How successful that move will be remains to be seen.

The situation may have been further complicated by news that the Russian Ministry of Industry and Trade intends to swap all American-made Intel and AMD processor chips in government computers with locally manufactured Baikal microprocessors. The Baikal will be manufactured by Moscow-based T-Platforms, maker of supercomputers.

The news came in the wake of diverging analyst opinions. Pacific Crest downgraded AMD to ‘underperform’ last week, while analysts with Argus Research upgraded the stock to a ‘hold’ rating. Cannacord Genuity initiated coverage of AMD last week, setting a price target of $5.00 per share and a ‘buy’ rating for the stock.

Here is what the company last reported in its 10-Q for the first quarter of the year:

• $2.6 billion in current assets
• $1.3 billion in current liabilities
• $1.4 billion in quarterly revenues
• $20 million in quarterly net loss

AMD lost nearly 10% in three consecutive sessions, stopping a notch above its 50-day moving average. Whether the stock has what it takes to bounce from these levels remains to be seen. The company will announce and discuss Q2 results in a conference call on July 17.