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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 204.70-2.5%Jan 8 3:59 PM EST
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To: chomolungma who wrote (82907)6/20/2002 6:26:19 PM
From: TimF of 275872
 
I just don’t get it. I read these boards and AMD stockholders seem to take some sort of comfort in their losses if Intel is suffering too. Is this any reason to invest in a stock?

I agree with you on this. It doesn't help AMD longs if Intel goes to 3 and AMD goes to 4...

I have read several times that AMD is cheap because when it’s compared to Intel using any standard valuation tool, it is a fraction of Intel. But for AMD to sell at Intel like valuations, it would require that AMD become Intel. And for AMD to become Intel, it follows that Intel would have to become AMD. Do you follow?

I think that the size and relative stability of Intel mean that it deserves a premium over AMD. The argument is just that it shouldn't be quite so big.

What if, for example, AMD did gain 50% market share? In this type of duopoly, the profit margins would be more like airline profit margins, not the profit margins Intel saw in the 1990s.

I don't think the profit margins would be like airline profit margins. I think you are however right that they would be much lower then what Intel saw in the 90s. I think if AMD got 50% of the market they would have a lot more profit then they have ever had before, but I think that Intel would go down more then AMD would go up in this scenario. I also consider the scenario to be very unlikely.

Tim
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