AMD tumbles into a bear market before getting upgraded at Moody’s

A staff technician presents a 300 millimeter chip wafer at Advanced Micro Devices Inc. (AMD) in Dresden, eastern Germany.AP Photo/Matthias Rietschel

• AMD tumbled into a bear market on Wednesday, a day after a research report said it sees a possible end in sight to Intel’s chip-making struggles.
• Later Wednesday, Moody’s upgraded AMD’s debt and outlook, citing growth in its PC segment as well as graphics cards and server chips.

The credit-rating agency Moody’s upgraded Advanced Micro Devices (AMD) on Wednesday, citing strength in gaming consoles like Xbox an PlayStation, even as the stock tumbled into bear-market territory — down more than 20% from its September high.

Shares of AMD rose slightly after the upgrade, but are still 16% off their high of $34.14 set on September 14. AMD shares had been rallying in recent weeks as rival Intel has struggled to produce a 10-nanometer chip. On Tuesday it was reported that Intel may be able to cure its ailing production problems sooner than expected.

“AMD is currently sampling 7 nanometer server processors, which it expects to launch in 2019 as well as a 7nm datacenter GPU that is expected to launch later in 2018,” Moody’s said.

“With this product and manufacturing positioning, combined with Intel’s challenges at 10 nanometers that are expected to last through 2019, AMD is well positioned to increase its share of the profitable and growing server CPU market from its current level of just over 1%.”

Here are the specific upgrades by Moody’s:

• Corporate family rating: up to “Ba3” from “B2”
• Probability of default rating: up to “Ba3-PD” from “B2-PD”
• Outstanding senior unsecured notes (due 2019, 2022 and 2024): up to “B1” from “B3”

And here’s some context from Moody’s on how those all fit together: 

Moody’s

Despite AMD’s recent slump, Moody’s cites “improved product positioning” in its personal-computing business, as well as custom chip uses like video games — which rely heavily on graphics cards for fast-processing and smooth rendering.

“Over the last two years, AMD product roadmap execution has improved considerably and the company successfully launched 2 generations of commercial and consumer desktop processors, mobile processors, a new graphics lineup, and its first generation of EPYC server processors,” Moody’s said.

It added: “The stable outlook reflects AMD’s much improved balance sheet and broadened product positioning and prospects for improved operating performance and cash generation over the next year. The ability to consistently execute product and technology transitions, as well as competition from strong competitors such as Intel and Nvidia remain key challenges.”

AMD is up 159% this year. 

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