Why did AMD's stock hit 13-year highs on Monday?

[John Naronha]

[Ignatius Bose]

Shares of Advanced Micro Devices Inc. (NASDAQ:AMD) settled above $33.00 on Monday, for the first time since May 2006, after Microsoft Corp. said that AMD chips would power its next-gen Xbox gaming console. The software giant’s Xbox console, codenamed “Project Scarlett” is expected to hit the markets around the 2020 holiday season and users will be able to stream games from their Xbox One consoles directly on to a mobile device. The announcement by Microsoft positions AMD as one of the key players in the high-end processor and graphics market for game consoles, with Microsoft and Sony being counted as the chipmaker’s leading customers.

At the BofA Merrill Lynch Global Tech conference last week, the company announced the launch of a wide range of products for servers, PCs, mobile and gaming devices in the second half of this year, taking on its dominant peer, Intel Corp. head on for the first time in its 50 year history.

Even before Microsoft’s announcement, AMD has been one of the best performing stocks in the sector this year, with the company's shares soaring more than 80 per cent year to date, compared to the 23 per cent jump in the PHLX Semiconductor Index, the 18 per cent rise in NASDAQ, and the flat performance by Intel.

With the company extremely confident on sales growth in the second half on the back of its new launches, analysts remain bullish on the stock. Looking ahead, with AMD breaking out of its long-term chart resistance at $30, the chipmaker could still throw up a few surprises.