Although the U.S. is working to strengthen its domestic chip sector, various issues like competition from China, labor shortages, and macroeconomic headwinds continue to impact the industry. Hence, I think while Advanced Micro Devices, Inc. (AMD – Get Rating) is best avoided, investors could wait for a better entry point for Veeco Instruments Inc. (VECO – Get Rating) and Amkor Technology, Inc. (AMKR – Get Rating).

Despite the growth potential, the semiconductor industry faces substantial challenges. U.S.-China tensions are affecting the global supply chain, leading to stricter controls on chip sales to China.

Adding to the grim landscape, while the chip shortage has improved, the industry grapples with the persistent threat of short-term sales downturns propelled by the turbulent currents of macroeconomic challenges and market cycles, casting a shadow of uncertainty over the entire year.

Moreover, the semiconductor industry faces the dangers of the impending shortage of engineers, computer scientists, and technicians in the United States, putting the expansion plans of the chip economy at risk.

The Semiconductor Industry Association, referring to a recent survey, stated that even though chipmakers are expected to create around 115,000 jobs by 2030, an alarming 58% of these positions could remain vacant due to a lack of qualified candidates.

Stock to Sell:

Advanced Micro Devices, Inc. (AMD – Get Rating)

AMD is a global semiconductor company that operates in four segments: Data Center; Client; Gaming; and Embedded segments.

REVISED: 2023 STOCK MARKET OUTLOOK

AMD’s trailing-12-month CAPEX/Sales of 2.42% is 1.1% lower than the industry average of 2.45%. Its trailing-12-month asset turnover ratio of 0.32x is 47.6% lower than the industry average of 0.62x.

AMD’s forward EV/EBITDA of 47.63x is 216.4% higher than the industry average of 15.05x. Its forward EV/EBIT multiple of 35.98 is 95.5% higher than the industry average of 18.40.

During the fiscal second quarter that ended July 1, 2023, AMD’s net revenue declined 18% year-over-year to $5.36 billion. While its non-GAAP operating expenses rose 3% from the prior-year quarter to $1.61 billion, non-GAAP operating income fell 46% year-over-year to $1.07 billion.

In addition, AMD’s non-GAAP net income and earnings per share decreased 44% and 45% year-over-year to $948 million and $0.58, respectively.

Analysts expect AMD’s EPS and revenue to amount to $0.68 and $5.70 billion in the current quarter ending September 2023.

Over the past five days, the stock has lost marginally to close the last trading session at $116.81.

AMD’s poor fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

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