Advanced Micro Devices' stock jumped nearly 12 percent Friday, one day after the company reported late Thursday better-than-expected profit in its second quarter.
The company also reported its first revenue gain in nearly two years.
AMD executives said they are seeing strong sales from the company's new line of graphics processors and chips used in video game consoles. Advanced Micro Devices makes computing and graphics processors that are used primarily in personal computers, video games and servers.
Canaccord Genuity analyst Matthew Ramsay said a number of factors are playing into the Wall Street reaction. He said AMD has an improved the "long-term road map" on how its chips will be used to generate sales and grab market share going forward.
In particular, Ramsay said, the upcoming launches of two new video game consoles this year are promising for AMD, which makes the chips that help power these gaming devices. And analysts are also optimistic about the company's upcoming "Zen" architecture for computer processors, which will be used in some desktop computers as early as this year.
"If you combine the near-term revenue upside from the gaming consoles," Ramsay said, with the "positive commentary" on Zen, then skeptics of AMD's turnaround start to become converted, which is fueling the Wall Street's enthusiastic reaction on Friday.
The chipmaker's stock has more than doubled since February and has reached a four-year high.
AMD has been struggling in recent years amid declining PC sales, but this year analysts say they are seeing signs of an impending turnaround.
There are a couple of things helping AMD turn things around. They have made several deals recently that helped them bring in big chunks of revenue, such the decision to sell a majority stake in one of its assembly facilities, and a licensing deal with China for their x86 chip technology.
These deals help AMD maintain their investments in research and development.
But Ramsay said the licensing deal in particular signifies that the intellectual property behind their chips, and the company's overall turnaround road map, is compelling enough that a customer was willing to pay for it up front.
AMD is one of the biggest tech employers in Central Texas.
The company employs 1,500 here, and although Austin is where many of its senior executives live and work, the company is headquartered in Sunnyvale, Calif.
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