AMD Shares Hit Five-Year Low

(Editor's note: Come see Alexei Oreskovic at the Money Show in San Francisco. Alexei will be speaking to attendees on Friday, Aug. 8 at 6 p.m. His seminar is titled: "Chip Shots: How to Play With Volatile Semiconductor Stocks.")

Advanced Micro Devices(AMD Quote) shares have fallen to their lowest level in more than five years.

In midday trading Thursday, the chipmaker's stock slid 3% to $4.90, the first time it has been below the $5 level - adjusted for splits - since February 2003.

The slide comes a week before AMD is due to report earnings, and caps several days of declines amid fears of softening demand for the PCs that use AMD microprocessors.

"There's been a lot of sell-side calls talking about general PC lethargy," says Stifel Nicolaus analyst Cody Acree. "We've had some recent data out of Taiwan talking about some order slowdowns."

Intel(INTC Quote), the world's No.1 maker of microprocessors is also feeling the heat, with its stock down nearly 13% in the past month.

Acree, who rates AMD a Buy, believes the sell-off is overdone. The PC market is in the seasonally slow summer period, before the positive impact of the back-to-school season can be seen, he notes.

And the market is not giving AMD credit for the graphics side of its business, in which its ATI division is taking market share from rival Nvidia(NVDA Quote),.

Last week, Nvidia slashed its sales forecast for the second quarter, citing competitive price pressures as well as weak global demand. Shares of Nvidia have plunged about 34% since its negative earnings pre-announcement.

"You're not getting an $11 stock in Nvidia unless AMD is doing something right," says Acree.