Published on 22.03.2024

AMD Stock

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AMD's IPO

AMD (ISIN: US0079031078) went public on the American stock exchange in 1972. The company raised $7.5 million, with an IPO price of $15.50 per share. Initially, AMD was traded over-the-counter (OTC). In 1979, it received a listing on the NYSE. In 2015, the AMD stock moved to the Nasdaq technology exchange.

Business strategy and future

The market for computer chips has been steadily growing since the invention of the chip in the mid-20th century. Chips are being used in increasingly more areas of everyday life. At the same time, the components on the chips are becoming smaller, enabling faster processing. Chip manufacturers are now working on a nanoscale. The components of a chip are about three thousand times smaller than a hair.

One characteristic of the chip sector is its cyclicality. Periods of rapid growth are occasionally interrupted by periods of stagnation. This is due to the significant investments required in production capacity. If the capacity grows faster than demand, it leads to a temporary growth slowdown.

Chip production in foundries

AMD does not produce the chips it sells itself. The chips are manufactured by so-called foundries, with Taiwan's TSMC being the largest. Other parts of the production process, such as packaging and testing of computer chips, are done by other companies. AMD focuses on design, marketing and sales. The model created by TSMC is used throughout the chip industry. For example, Intel is also a major customer of TSMC.

AMD's chips are used in a wide range of electronic applications, for example, desktops and laptops. In addition, AMD also supplies chips for servers used by cloud service providers and processors used in gaming consoles, among other applications. AMD is a major player in the graphics market but trails behind the market leader Nvidia in this space.

Half of AMD's revenue is from the US and China

AMD generates over half of its revenue from the US and China. Two major customers account for a quarter of the revenue together. The company sees this concentration of revenue as a risk. If either of the two customers were to end the relationship, it would have a significant impact on the results. AMD has not disclosed the names of these two companies.

History of AMD

Advanced Micro Devices, abbreviated as AMD, was founded in 1969 in Silicon Valley, California. Initially, the company focused on improving existing chips (also known as microchips or semiconductors). After five years, AMD opened a factory in Malaysia. At that time, it produced over two hundred different chip products for customers, often electronics manufacturers.

In the 1980s, computers experienced rapid growth and AMD grew along with it. In the early 1990s, the company began producing chips for use in PCs. AMD then became involved in a legal battle with Intel over whether AMD could sell a clone of the 386 processors. AMD won this battle in 1994. That year, the chip producer struck a deal with Compaq for chip supply.

Competition with Intel

Intel has always been AMD’s main competitor. According to AMD, Intel's strong position is even a significant risk for the company. As the market leader, Intel can largely determine the requirements and specifications that computer chips must meet. According to the company, this has led to lower revenues and lower profit margins for AMD products.

In 2006, AMD made a significant move into the market for graphics card chips with the acquisition of ATI Technologies. These types of chips still form an important part of AMD's activities.

Dividend from AMD

AMD has never paid a dividend and does not expect to do so in the future. The company reinvests all profits in long-term activity growth.

The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks (e.g price volatility, currency or liquidity risk). You can lose your invested funds. Consider your knowledge and experience when making investment decisions. Past performance is not a reliable indicator of future results. Markets are volatile and can fluctuate significantly due to economic, political, regulatory, or other developments.

Sources: Silicon Valley Historical Association, AMD.com, The Motley Fool

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