Buy AI Chip Stocks at Discounted Prices Right Now (Hint: It's Not Nvidia)
Amidst the recent surge in semiconductor stocks, one notable exception is Advanced Micro Devices (AMD), whose shares have dipped a staggering 36% over the past year. However, I'm here to analyse AMD's Q4 2024 and full-year earnings report and shed light on why this dip might just be an incredible opportunity.
A Tale of two Halves
AMD
While AMD posted impressive revenue growth of 24% and a net income surge of 42% for the entire year, the tale of two halves is stark. Two of AMD's four operating segments are thriving, while two others are struggling rather significantly. This makes AMD's performance seem less impressive than its chip industry peers.
buy the dip in AMD stock.
However, let's not jump the gun. The semiconductor industry is cyclical, meaning it goes through periods of fluctuation. And it's not unusual for a company like AMD to witness ups and downs across various operating segments.
gaming and embedded segments declined by 59% and 13%, respectively, it's hard not to wonder what AMD would look like if all of its major businesses were in a position of strength.
The AI Revolution
cyclical. For this reason, it's not uncommon for a company such as
The area that captivates me most about AMD is its data center business. In a world dominated by Nvidia in the realm of data center graphics processing units (GPUs), AMD is steadily gaining ground. Its MI300X accelerators, released in late 2023, have made it possible for AMD to compete more directly with Nvidia, at a lower cost too.
AMD to witness ebbs and flows across certain operating categories. To me, the real concerns should be over whether or not the company's long-term narrative looks robust or weak.
As a result, AMD has scored partnerships with tech giants like Microsoft, Meta Platforms (formerly Facebook), and Oracle. These big players have welcomed AMD's hardware into their existing Nvidia stack. With industry leaders expanding AI infrastructure and investments, optimism surrounds AMD's potential to grow and disrupt the market.
Reasons to Seize the Opportunity
Meta Platforms, and
AMD's stock is currently trading at a forward price-to-earnings (P/E) multiple of 24, the same as the S&P 500 average. I find this parity hard to justify when considering the multitude of expanding markets associated with AI and the crucial role chips play in powering them. AMD's rapid advancement in the data center business even strengthens the case for its potential to challenge giants like Nvidia in the future.
investment in AI infrastructure is very much planned to continue, and I see these commitments as a positive force for AMD.
The Verdict
forward price-to-earnings (P/E) multiple of 24, which is essentially the same as the average forward P/E of the S&P 500. I see the parity between these multiples as a suggestion that investors view a position in AMD as carrying the same upside as simply dumping your money into an index tracking the S&P 500.
Despite negative sentiments around AMD, the company's promising data center growth and AI investments present a compelling case for buying its dip. With the possibility of AMD setting new trends and challenging market leaders, it's time to hold onto AMD stock with conviction and watch as the tide turns.
Now, let me address the elephant in the room: the enrichment data. While it's essential to be aware of external factors affecting AMD, such as competition, market volatility, and supply chain challenges, it's vital to remain invested in the company's long-term potential.
Despite the recent dip in AMD's shares, the company's impressive net income surge and revenue growth hint at potential opportunities for investors. The semiconductor industry's cyclical nature might explain the ups and downs in AMD's operating segments, such as the gaming and embedded segments showing a decline of 59% and 13%, respectively.
The surge in semiconductor stocks has not spared AMD completely, but its data center business is making significant strides. AMD's MI300X accelerators, launched in late 2023, are directly challenging Nvidia in the data center GPU market, offering a lower-cost solution.
Investors might find it hard to justify AMD's forward price-to-earnings (P/E) multiple of 24, which is equal to the S&P 500 average. Considering the growing investments in AI infrastructure by tech giants like Meta Platforms and Oracle, AMD's potential to disrupt the market and challenge market leaders is quite promising.
As the estimated euphoria around semiconductor stocks begins to subside and the industry enters a potential phase of collapse, AMD's robust long-term narrative and promising data center growth remain compelling reasons to seize the opportunity and buy the dip in AMD stock.