Few expected the steady rebound in shares of Advanced Micro Devices (AMD), including this author. After bottoming at around $1.61, the stock traded above $3 at the end of December 2015. With traders booking some profit, will AMD hold support at $2.60 and continue its climb from there? Chances are good it will.

AMD’s 20 day moving average is on a positive trend settling at around $2.60. A key signal suggesting a positive shift in sentiment from AMD is a higher incidence of related keywords. Consoles, Internet of Things, and Virtual Reality are three phrases that rose steadily between October and December. In that time, console sales – Sony (SNE) PS 4, Microsoft (MSFT) Xbox One, and Nintendo (NTDOY) Wii U continued. Sony won the title for fastest console sales. It sold 30 million units as a November 2015.

AMD’s stock trended higher along higher console sales:

Source: https://www.tickertags.com/

AMD’s saving grace is that it is the chip supplier for all three consoles. The firm is reliant on PC and GPU (graphics cards) sales, both of which are struggling. This year though, GPU sales should rebound, helped by a product refresh and price cuts. Any stabilization in sales of PC chips is welcome. Investors may only hope of a stop in a decline for them. AMD is aiming higher than that. Its “Zen” lineup promises higher CPU and APU performance. The solution is scalable, and HBM – high bandwidth memory – reportedly has 128GB/s.

The Carrizo line is an upgrade to the interconnects used in the Xbox One and PS4. This means that when AMD delivers the next generation solutions for consoles in the years ahead, the share price will appreciate.

The bottom line

Intel (INTC) is coasting with its HD-series integrated graphics. AMD will once again disrupt this in its next generation of chips. For now, AMD’s share price will stabilize, thanks to lower debt, stable cash levels, and cash flow from sales of GPUs, PC processors, and console chips.