4 reasons to buy AMD stock like there’s no tomorrow

Advanced Micro Devices (NASDAQ:AMD) The company became a Wall Street darling last year as a boom in artificial intelligence (AI) highlighted the potential of its business. The company’s shares are up 87% since March of last year and show no signs of slowing down, rising 22% since the start of 2024.

The launch of OpenAI’s ChatGPT has reignited interest in artificial intelligence and led to countless tech companies restructuring their operations to prioritize developing markets. Increased demand for AI services has also boosted sales of graphics processing units (GPUs), as the chips are critical for training AI models.

AMD was slightly late in the field of artificial intelligence last year, and its competitors, NvidiaIt is a leader in the field of artificial intelligence chips. However, AMD is investing heavily in the industry and is expected to reap huge benefits from its efforts in the coming years.

So, here are four reasons to buy AMD stock like there’s no tomorrow.

1. AMD has huge potential in the field of artificial intelligence

According to data from Grand View Research, the artificial intelligence market was close to US$200 billion last year and is expected to expand at a compound annual growth rate of 37% by 2030. On this trajectory, the industry will reach nearly $2 trillion by the end of 2020. ten years.

With Nvidia’s meteoric rise last year, it captured 90% of the market in 2019. Artificial Intelligence GPU, putting companies like AMD at a disadvantage. However, AMD is preparing to challenge the chip maker this year.

In December last year, AMD launched the new MI300X AI GPU. The chip is designed to compete directly with Nvidia’s products and has already attracted the attention of some tech giants. Microsoft and meta platform Sign as a client.

2. Seek to dominate their own field of artificial intelligence

AMD’s financial reports don’t yet reflect its heavy investment in artificial intelligence. However, the company’s most recent quarterly earnings report suggests it’s moving in the right direction. In the fourth quarter of 2023, AMD’s revenue increased by 10% year-on-year to $6 billion, exceeding analysts’ expectations for a growth of approximately $60 million. Revenue from the company’s artificial intelligence-focused data center segment grew 38%.

In addition to AI chips, AMD is also diversifying its market position by expanding into artificial intelligence-powered personal computers. Research firm IDC said it expects PC shipments to grow significantly this year, with artificial intelligence integration becoming a key catalyst.

A report from Canalys predicts that 60% of all PCs shipped in 2027 will support artificial intelligence.

If AMD can monopolize the artificial intelligence PC market, its revenue may grow significantly as the industry develops and demand grows.

3. Improvement of the PC market

In addition to the growth of artificial intelligence, AMD has also benefited from improvements in the PC market. Soaring inflation has caused a sharp decline in PC sales, causing shipments to fall 16% in 2022 and continue to decline throughout most of 2023. However, recent reports suggest the market is finally showing signs of recovery.

Data comes from Gartner Corporation Display PC shipments increased 0.3% in the fourth quarter of 2023, the first increase in more than a year. AMD’s sales reflected the improving market, with its PC-focused customer segment reporting 62% revenue growth in the fourth quarter of 2023.

AMD is on a promising growth trajectory thanks to developments in the artificial intelligence and PC markets.

4. May have more headroom than Nvidia

Thanks to strong growth in 2023, Nvidia became the first chip manufacturer to surpass $1 trillion in market capitalization. While the vast potential of artificial intelligence suggests that Nvidia still has plenty of room to grow, AMD could be more profitable for new investors in the long run.

EPS estimates appear to support this.

AMD earnings per share forecast chart for the next two fiscal years

AMD earnings per share forecast chart for the next two fiscal years

This chart shows that AMD’s earnings could reach $7 per share over the next two fiscal years, while Nvidia’s earnings could reach nearly $36 per share. On paper, Nvidia looks like the clear winner.However, multiplying these numbers by the company’s earnings forward price to earnings ratio (AMD is 49, Nvidia is 38) AMD’s stock price is $345, and Nvidia’s stock price is $1,353.

Based on these forecasts, AMD’s stock price could rise 92% and Nvidia’s stock price could rise 43% by fiscal 2026. NVIDIA’s growth prospects are promising. However, AMD stock is too good to pass up. AMD may be in the early stages of its artificial intelligence journey, but that could mean it has more room to grow.

Should you invest $1,000 in Advanced Micro Devices right now?

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Randi Zuckerberg is the former director of market development and spokesperson for Facebook, the sister of Meta Platforms CEO Mark Zuckerberg, and a board member of The Motley Fool. Danny Cook The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Meta Platforms and Nvidia. The Motley Fool recommends Gartner. Motley Fool has disclosure policy.

4 reasons to buy AMD stock like there’s no tomorrow Originally published by The Motley Fool

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