If you had invested $ 1,000 in AMD’s initial public offering, you would have that much money now

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modern micro devices (NASDAQ: AMD), the world’s second largest manufacturer of x86 CPUs and GPUs, was once just a shabby start-up based in the living room. It was founded in 1969, just a year after its rival Intel (NASDAQ: INTC), and the founders of the two chip manufacturers were former employees of Fairchild Semiconductor.

AMD was originally a “second source” chip designer who modified chips from larger companies like Fairchild. It eventually gained more clients in several industries and went public in 1972. Let’s take a look back at AMD’s IPO to see how much a $ 1,000 investment (just over $ 6,000 in $ 2019) would be worth today.

AMD boss Lisa Su. Image source: AMD.

Do the math

AMD went public for $ 15 per share, so you could have bought 66 shares for $ 1,000. AMD stock then split six times, so you would currently own 1,782 shares, which would be worth nearly $ 70,000 today. AMD has never paid a dividend before.

AMD’s return over the same period outperformed the S&P 500’s 2,690% return. However, investors would have made significantly more money by investing in Intel’s IPO a year earlier.

Intel went public for $ 23.50 in October 1972, so you could have bought 42 shares for $ 1,000. Intel’s stock split has since been split 13 times, growing that position to 51,030 shares – which would be worth $ 2.94 million today and paying over $ 64,000 in annual dividends.

Why was AMD having trouble catching up with Intel?

Intel and AMD parted ways in the late 1970s. In 1978, Intel introduced the first x86 microprocessors, and this architecture remains the industry standard for PCs and servers to this day. At the time, AMD was producing other chips such as logic chips and RAM.

Intel signed a technology swap agreement with AMD in 1982 that allowed each company to redevelop and sell the chips developed by the other. This agreement formed the basis for AMD’s own x86 CPU business, but Intel stopped sharing its x86 designs with AMD in 1985, forcing the chipmaker to develop its own designs.

AMD continued to reconstruct Intel’s x86 CPU designs for years, but its merger with chip maker NexGen in 1996 eventually made it possible to develop original CPUs in the late 1990s. That shift allowed the company to gain market share over Intel, but a series of management changes and weaker chip designs allowed Intel to fight back.

AMD expanded into the GPU market by purchasing ATI in 2006, but this led to a war with NVIDIA (NASDAQ: NVDA). Waging wars against Intel and NVIDIA on two fronts has been exhausting and costly, and many cops have given up on the stock. A comparison of the sales of AMD and Intel shows how strongly the growth of the two chip manufacturers has diverged over the past three decades:

AMD sales (TTM) chart

AMD Revenue (TTM) Data from YCharts

But is AMD making a comeback against Intel?

AMD has struggled to keep up with Intel in the past, but investors should never judge a stock by its past performance. If they did, they’d overlook AMD’s impressive comeback over the past five years under the leadership of CEO Lisa Su.

Today, AMD’s APUs – which fuse the CPU and GPU into a single chip – power the PS4 and Xbox One. AMD’s chips will also be the upcoming PS5 and Next generation Xbox.

AMD’s new Ryzen CPUs, which are roughly the comparable CPUs from Intel at. correspond lower prices, are gaining ground again in the PC and data center market versus Intel. So is Intel’s persistent lack of chips crowded OEMs to AMD’s new chips.

On the GPU market are AMD’s newest Radeon GPUs probably appropriate NVIDIA’s offerings are blow by blow in both the low-end and high-end markets. Put simply, Lisa Sus AMD is fast becoming a major threat to Intel and NVIDIA.

Looking back is always 20/20

It’s easy to see that Intel has been a bigger investment overall than AMD over the past few decades, but in hindsight it’s always 20/20. Both chipmakers appeared to be speculative in the early 1970s, and few people likely saw the two companies having a near duopoly in CPUs by the early 21st century. AMD remains the underdog in the CPU and GPU markets, but it still has a lot of bite and could still outperform Intel or NVIDIA in the decades to come.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.



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