Chipmaker Advanced Micro Devices (NASDAQ:AMD) is expected to see declining output in the coming months owing to a lack of company-owned semiconductor fabs. Further, the stock looks overvalued compared to its peers. So, we think it could be wise to instead bet on semiconductor stocks Broadcom (NASDAQ:AVGO), STMicroelectronics (STM), Amkor (NASDAQ:AMKR), and Diodes (NASDAQ:DIOD) because of their greater ability to capitalize on the industry’s tailwinds and deliver better returns. Let’s discuss.Since 2014, president and chief executive officer Lisa Su’s leadership has helped popular chipmaker Advanced Micro Devices, Inc. (AMD) make a strong comeback, and its stock has gained almost 1500% over the past five years. Product innovations have made AMD a solid rival to Intel Corporation (NASDAQ:INTC) in the CPU market and NVIDIA Corporation (NASDAQ:NVDA) in the GPU market. AMD chips, which are manufactured by Taiwan Semiconductor Manufacturing Company (TSM), are run on Sony (NYSE:SONY) PlayStation and Microsoft’s (MSFT) Xbox gaming consoles.
But because geopolitical tensions between Taiwan and China and the reimposition of COVID-19 restrictions could significantly affect TSM’s production, AMD could suffer from its dependence on TSM. In addition, AMD’s overvaluation is expected to turn off investors amid the current market volatility. AMD’s 8.60x forward Price/Sales is 120% higher than the 3.91x industry average. AMD closed yesterday’s session at $107.48, which is 12.3% lower than its 52-week high.
While the global chip shortage puts pressure on semiconductor companies worldwide, strong demand from various industries and increasing government and private investments worldwide should drive growth for some of the leading companies in the space. Consequently, we believe Broadcom Inc. (AVGO), STMicroelectronics N.V. (STM), Amkor Technology , Inc. (AMKR), and Diodes Incorporated (DIOD) are well-positioned to outperform the broader market in the near term based on their latest developments and solid quarterly financials. So, we think these stocks are better investments than AMD now.