If I’d invested £1,000 in Advanced Micro Devices shares last year, here’s what I’d have now!

Advanced Micro Devices (NASDAQGS:AMD) is one of the most traded stocks in the world. The multinational semiconductor company develops computer processors and related technologies from its base in Santa Clara.

So how would I have invested in Advanced Micro Devices a year ago? And what’s next for the semiconductor giant?

A challenging year

If I had invested £1,000 in the business last January, today I would have over £550. That’s a pretty bad return on my investment.

The stock has fallen 49% over the past year. However, it should be noted that this part of the market (growth shares) is not doing well from the end of 2021.

The only result is that the pound is now about 10% weaker than it was a year ago. That means the dollar I bought to buy US-listed shares a year ago is now worth more than the pound.

Are things getting better?

There are several factors to consider here. Initially, investors may own Advanced Micro Devices as part of their portfolio as they see the stock benefit from technology-related trends. These microchips are a big part of the future.

But the short-term performance has been very clear. PCs are a big part of their business and the company is already starting to feel the negative effects of slowing computer sales.

In highlighting this, the company recently reported third-quarter revenue of $5.57bn – which was $1bn lower than previously guided for the second quarter – and below analysts’ expectations of $5.62bn. However, it is up 29% annually.

And in the current macroeconomic environment, investors are concerned that growth could slow as we enter 2023.

Should I buy this stock?

The short-term environment is clearly challenging for many growth stocks. But I don’t see this as a reason to discount Advanced Micro Devices as an option. After all, semiconductors will be a big part of our increasingly digital world.

The company has several advantages over its competitors such as Intel. AMD is a ‘fables’ semiconductor company, meaning it doesn’t have its own factories. This can be seen as a disadvantage, but foundries are expensive to run and require constant investment to continue to develop small and advanced chips. So it can also be seen as an advantage.

However, the company only needs to design the chip to ensure that it is compatible with third-party contract chip makers like Taiwan Semiconductor Manufacturing. There are clear benefits to this arrangement. The company’s latest Zen-based processors are the most powerful consumer-grade chips on the market.

Advanced Micro Devices also shares a near duopoly with Nvidia in the discrete graphics processing unit market – a discrete GPU is one that is separate from the processor. The chips are also used for the PS5 and Xbox Series S and X. Intel has not provided similar chips for game consoles until now.

So should I buy this stock? Yes, while I am confident about the sector’s long-term prospects, I expect more volatility in the near term. So, I’ll keep an eye on Advanced Micro Devices, but I haven’t bought one yet.