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AMD Stock Gains as ITC Accepts Patent Violation Complaint

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Advanced Micro Devices Inc. (AMD - Free Report) advanced almost 7% to close at $14.40 on Mar 20, after the U.S. International Trade Commission (ITC) agreed to investigate into companies who have allegedly infringed on AMD’s graphic patents.

As reported by Tech Portal, in Jan 2017, AMD had filed a complaint with the U.S. ITC against products of LG, VIZIO, Mediatek and Sigma Designs alleging violation of its three graphics patents. Notably, AMD acquired two of these patents after taking over ATI Technologies way back in 2006.

The legal move will benefit AMD, if the investigation finds these four manufacturers guilty of patent infringement. The commission can discontinue the selling of devices with components that violate AMD’s patents forcing these manufacturers to sign up a licensing agreement. This will eventually boost AMD’s top-line growth.

According to Austin Biz Journal, AMD’s stock price also got a boost from a positive report by Mark Lipicas, an analyst for New York-based investment banking firm Jefferies LLC. The analyst expects AMD to benefit from the launch of the Ryzen microchip in the desktop PC and server market currently dominated by Intel (INTC - Free Report) .

We note that AMD has significantly outperformed the Zacks Electronics Semiconductors industry in the last one year. While the stock has gained a massive 414.3%, the industry witnessed a surge of 68.2% in the same time frame.

Ryzen & Vega: Key Catalysts for AMD

AMD recently released Ryzen 7 chips amid much fan faring. The top-tier Ryzen 7 1800X has been touted as a strong competitor to Intel’s Core i7 6900K octo-core/16-thread CPU. However, the high-end chips have received mixed reviews particularly in applications where single thread performance is more necessary, like in gaming, which is a setback for the company.

AMD is now all set to launch its much anticipated Ryzen 5 CPUs, which will be in the range of $169–$249. The competitively priced products can help the company gain market share against Intel. Further, it is also scheduled to launch Ryzen 3 line of products in the latter half of this year.

AMD is now rumored to be working on a 16-core, 32-thread Ryzen CPU that supports quad-channel DDR4 memory and X399 chipset. According to Digital Trends that quoted Canard PC Hardware, a French PC magazine, the chip will be targeted towards high-end desktop users for applications like video editing and rendering. The pricing for the chips is expected to be around $1000.

AMD is also anticipated to launch Vega in the first half of 2017. Vega’s incredible speed and sleeker memory allocation & usage capabilities will make AMD a potent force in the fast emerging of Artificial Intelligence (AI) market. Notably, NVIDIA (NVDA - Free Report) is the dominant player in this market due to its Pascal GPU architecture. (Read More: Will AMD's Vega Pose a Threat to NVIDIA's GPU Dominance?)

Zacks Rank & Key Pick

Currently, AMD carries a Zacks Rank #3 (Hold). Broadcom (AVGO - Free Report) sporting a Zacks Rank #1 (Strong Buy) is a better-ranked stock in the sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Broadcom is currently pegged at 13.6% as compared with AMD’s 6.3%.

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