Should AMD Investors Worry About Google TPUs and the DRAM Shortage?

• StockStory Top Pick AMD -0.16%

Quick Read

• AMD (AMD) shares fell 18% in November due to AI valuation concerns and Google TPU competition.

• AMD plans to raise GPU prices by 10% to protect margins from DRAM shortage pressures.

• Morgan Stanley says AMD faces no immediate danger from application-specific integrated circuits.

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Shares of Advanced Micro Devices (NASDAQ:AMD) have not had a good November, now down 18% in the past month, thanks in part to the AI valuation sell-off and a slew of developments that have impacted the semiconductor scene. With Google TPUs starting to weigh heavily on shares of the GPU makers, questions linger as to what the next big move in the top GPU players is going to be.

Combined with the DRAM shortage and the impact on GPU prices, I think there's a lot of stuff for semi stock investors to digest as we head into the holiday season. Personally, I don't think there's a ton to worry about, especially since much of the recent headlines have already worked their way into the stock over these past few weeks.

Advanced Micro Devices shares might still be cheap

Perhaps the biggest driver of the latest sell-off is less to do with recent developments in chips and more to do with the extended valuation and overbought conditions going into the month of November. Either way, I'd be more inclined to be a buyer than a seller of shares of Advanced Micro Devices as they look to give back more of the euphoric gains enjoyed back in October.

While a 114 times trailing price-to-earnings (P/E) multiple might not make Advanced Micro Devices stock look like a bargain, I do find it to be a great deal for those looking to continue riding on the outperforming GPU titan, as it looks to do its best to keep flooring it in an effort to catch up in the AI chip race.

Google TPUs and DRAM shortage could make for a messy 2026

While Google TPUs do pose a longer-term competitive threat to the GPU firms, Morgan Stanley analysts think that Advanced Micro Devices isn't in any "immediate danger" from ASICs (application-specific integrated circuits). I'm more inclined to agree. The note has to be soothing for Advanced Micro Devices shareholders as shares take a dive.

Perhaps investors are overly anxious about a fairly distant headwind. I think it's quite a stretch to think that Advanced Micro Devices is in trouble, just because of reports to use an ASIC-based solution. In any case, I think the big problem for Advanced Micro Devices is whether it has enough GPUs to go around next year, especially as adoption looks to level up while the DRAM shortage looks to complicate things.

Undoubtedly, passing price hikes (reported to be 10%) onto consumers is one way to go, as Advanced Micro Devices looks to dodge and weave past what would have otherwise been a heavy blow to margins. I think buyers have no option other than to pay the higher price, and that bodes very well for Advanced Micro Devices.

The bottom line

Perhaps those put off by high prices might switch to Advanced Micro Devices for the relative savings. Either way, I'd put my faith in Lisa Su and company as her firm navigates an environment that could see bottlenecks as a result of the DRAM shortage. In any case, I think Advanced Micro Devices stock is well-positioned for a decent showing next year, as it prepares accordingly for challenges ahead while keeping a foot to the pedal in the AI chip race.

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