Intel Has a Massive Warning for AMD Stock Investors. Is It Time to Book Profits Before Nov. 3?

Intel (NASDAQ:INTC) released its third-quarter results on Oct. 29, and shares of the company crashed more than 28% the following day.

The primary reason behind the bloodbath in Intel stock was its weaker-than-expected guidance. Though Intel guided for a strong year-over-year increase in both revenue and earnings, Wall Street was expecting more. However, the sharp drop in personal computer (PC) sales this year offset the impressive gains that Intel enjoyed in the data center segment.

That doesn't bode well for Advanced Micro Devices (NASDAQ:AMD). Let's look at the reasons why.

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AMD's reliance on the PC market could dent investor confidence in the stock

When AMD released its second-quarter results in August, the company reported a healthy 23% year-over-year increase in revenue from sales of client central processing units (CPUs) for PCs. The segment's revenue landed at $3.1 billion, accounting for 27% of its top line.

Similarly, Intel's revenue from its client computing segment was up by 13% year over year in Q2 to $8.9 billion. However, the script flipped in Q3, with Intel reporting a 5% year-over-year drop in client computing revenue to $8.1 billion. The company blamed poor PC sales for this decline, which isn't surprising as the market has been going through a rough patch due to high memory costs and component shortages.

Counterpoint Research estimates that global PC shipments dropped 21% year over year in Q3. The firm expects Q4 to be even worse, with a 27% drop from the year-ago period. Similarly, Intel noted that the PC decline has accelerated recently amid high costs that are pressuring companies' IT budgets. So, AMD could feel the heat when it releases Q3 results after the market closes on Nov. 3.

Intel also pointed out that PC shipments will drop around 10% in 2027, with "year-over-year declines to be more pronounced during the first half." The situation could improve in the second half of 2027 due to easier comparisons from the year-ago period. However, AMD's client CPU business may face near-term challenges.

Should investors book profits in AMD ahead of its quarterly report?

AMD stock has jumped 90% over the past year, which is why investors may be wondering whether they should take profits off the table. Well, the broader market sentiment on artificial intelligence (AI) stocks suggests that booking profits could be the right move. However, if AMD suffers a steep fall following its Nov. 3 report, it may be a smart idea to buy it for multiple reasons.

First, Intel's PC decline isn't just attributable to the broader market's troubles. Chipzilla has been losing share to AMD in this space. Mercury Research notes that AMD's share of the client CPU market increased by 6.4 percentage points year over year in Q2. So, AMD may not suffer the same decline as Intel did in its PC-focused business last quarter.

Second, Intel noted that the demand for AI-focused chips from data centers is increasing. For instance, Intel expects server CPU unit shipments to increase by 30% this year and next. The good news for AMD is that it is gaining share from Intel in server CPUs as well. AMD's Q2 server CPU share was 34.5%, up from 27.3% a year ago.

So, the growth of AMD's data center business could be much stronger than Intel's, driven by its market share gains and an increase in server CPU prices due to short supply. In all, I won't be surprised to see AMD doing better than Intel when it releases its Q3 results. But if the stock drops following its report, buying it could be a smart move.

After all, AMD's earnings per share (EPS) are anticipated to increase at a 65% compound annual growth rate (CAGR) over the long run, according to YCharts. Also, the stock trades at less than 32 times forward earnings, which isn't all that expensive considering that its EPS growth is anticipated to accelerate from 83% in 2026 to 109% next year.

So, any potential decline in AMD's shares following Intel's quarterly report, as well as its own Q3 earnings on Nov. 3, can be treated as a buying opportunity due to its terrific growth potential and valuation.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Intel. The Motley Fool has a disclosure policy.