AMD Stock Soars on Microsoft Xbox Collaboration

AMD stock rallied 5.24% after the company confirmed plans to work with Microsoft to develop system on a chip (SoC) for Xbox devices, including next-generation consoles and handheld gaming PCs. This collaboration has investors excited and wondering if Xbox will release its own line of pre-built gaming PCs. AMD has carved out a space for itself with SoCs for console makers, including Sony's PlayStation devices.

Advanced Micro Devices (AMD) stock rebounded on Thursday after the semiconductor company confirmed plans to work with Microsoft (MSFT) to develop system on a chip (SoC) for Xbox devices, including next-generation consoles and handheld gaming PCs [1]. This collaboration has investors excited and wondering if Xbox will release its own line of pre-built gaming PCs.

AMD stock was up 5.24% as of Thursday morning, extending a 42.12% year-to-date rally [1]. The shares have also climbed 19.66% higher over the past 12 months. While yesterday’s earnings report took a bit of the wind out of AMD’s sails, today’s movement shows it won’t be hard for the chip company to make up that lost ground.

The collaboration with Microsoft follows AMD’s contribution to the ROG Xbox Ally X, a handheld gaming PC coming out later this year [1]. The mention of other devices, including PCs, has some wondering if Xbox has plans to release its own line of pre-built gaming PCs. Xbox has been dedicated to its Game Pass subscription service this console generation, as the Xbox Series X/S hasn’t sold well. With this comes a focus on releasing games on multiple platforms, making any device an Xbox. It could be that the company wants to get into the gaming PC space, which is already popular with Game Pass users.

AMD has carved out a space for itself with SoCs for console makers. It also makes these for Sony (SONY) to power the company’s PlayStation devices [1].

Turning to Wall Street, the analysts’ consensus rating for AMD is Moderate Buy, based on 25 Buy, 10 Hold, and a single Sell rating over the past three months [1]. With that comes an average AMD stock price target of $161.16, representing a potential 6.12% downside for the shares.

AMD’s Q2 performance was resilient, with $7.7 billion in revenue, a 23% year-over-year increase, and a 54% non-GAAP gross margin [2]. The company’s client computing business, which includes Ryzen desktop units and Radeon 9600 XT graphics cards, saw a 73% quarterly jump to $1.1 billion. The phased introduction of the MI350 GPU in June laid the groundwork for a powerful second-half ramp, with performance benchmarks demonstrating parity or outperformance against Nvidia’s B200 architecture in inference workloads [2].

Microsoft may be ready to announce an official release date for its long-awaited Xbox handheld in August [3]. The Asus ROG Xbox Ally and Ally X are expected to hit the scene in October, with Microsoft planning to share pricing and preorder info later this month. The end of the year is shaping up to be open season for handheld PCs, though pricing may be a sticking point. Dealabs reports that the lower-end ROG Xbox Ally will be 599 euros, or close to $697 in U.S., while the Xbox Ally X may demand 899 euros, or closer to $1,047.

AMD’s stock movement and collaboration with Microsoft reflect the company’s strategic positioning in the gaming hardware market. The collaboration with Microsoft and the potential for Xbox to release its own line of pre-built gaming PCs indicate a strong growth trajectory for AMD.

References:
[1] https://www.tipranks.com/news/amd-stock-rallies-on-plans-to-power-microsofts-xbox-devices
[2] https://www.tradingnews.com/news/amd-stock-at-168-usd-surges-after-q2-bears-mi350-ramp-
[3] https://gizmodo.com/the-first-xbox-handheld-could-be-coming-sooner-than-you-think-2000640614