Despite supplying some of the world’s most popular chips, advanced micro devices (NASDAQ:AMD) Since peaking in March 2024, it has declined by 49%. During the same period, Nvidia stocks rose by about 40%.
Nvidia creates cutting-edge graphics processing units (GPUs) for data centers used to develop artificial intelligence (AI) models. The company benefits from the strong first-mover advantage, gaining the market share of Lion, adding trillions of dollars to its market capitalization in the process.
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AMD is quickly catching up to Nvidia (technically speaking) in the data center business, but it is also a leader in another field in the AI semiconductor race, and could be a major source of growth. So 49% of AMD stocks represent the ultimate long-term purchase opportunity?
Image source: Getty Images.
The AI revolution requires more than just GPUs
Towards the end of 2023, AMD has launched its MI300X data center GPU for AI workloads. It is designed to compete with NVIDIA’s flagship H100. It attracted many of Nvidia’s top customers, including Meta Platform and Microsoft, marking a highly successful launch into the AI GPU space.
AMD continued with the MI300X last year with the MI325X last year. It is designed to match NVIDIA’s new H200. According to AMD, some customers offer significant performance and cost benefits by using the MI325X over competing GPUs.
This will result in a MI350X. This will become AMD’s most powerful GPU ever, thanks to the new Compute DNA (cDNA) 4 architecture. It is expected to deliver a 35x performance increase compared to cDNA 3 chips like the MI300X, so it should rival Nvidia’s new Blackwell lineup, which is currently the gold standard for AI.
AMD was scheduled to launch the MI350 series in the second half of 2025, but customer samples are expected to be shipped this quarter earlier than planned.
However, data centers will never be the center of the AI boom. Companies such as China-based Deepseek use only a small portion of the computing capabilities (and financial resources) of industry leaders like OpenAI to provide globally competitive AI models. We develop efficient training and reasoning techniques. This means that computers, smartphones, and other devices can run AI software immediately, independent of external data centers.
AMD’s personal computer (PC) for Ryzen AI 300 series chips was kept for exactly that purpose. Currently, it is the most powerful and bestselling chip in this segment of the market. The company expects PC manufacturers such as Microsoft, HP, Lenovo and Asus to launch more than 100 commercial hardware platforms in 2025 using the Ryzen AI 300 series chip.
The ability to handle AI software-on-device is to make the user experience much faster, meaning that you can leverage the power of this technology anywhere, even if you are connected to the internet. Ultimately, AMD is in the cusp of multi-year opportunities, as all computers and devices have the ability to run AI workloads.
AMD’s AI-related revenues are rising sharply
AMD recorded a record year in 2024. Revenue was $25.8 billion, but only 14% growth compared to the previous year, but the actual story is beneath the surface.
Data center revenues skyrocketed from 94% annually to $12.6 billion. The company far surpassed its initial expectations as CEO Lisa Su had expected to expect just $2 billion in GPU sales in 2024. Better yet, she believes GPU revenue will expand to tens of millions of dollars a year in the coming years.
The client segment, home to Ryzen AI chips, generated revenue of $7 billion in 2024, up 52% year-on-year. Su believes that the business unit will grow faster in 2025 than the overall market. This suggests that AMD will acquire even more market share from its competitors.
Is AMD’s overall topline growth very slow compared to data centers and client segments? Because the company provided two other business units, games and reduced annual revenues built in.
The game segment generated revenue of $2.6 billion a year, down 58%. Customers are waiting for AMD’s next-generation Radeon 9070 Gaming GPU. This will be on sale in March and should gradually recover with sales in this segment. The embedded segment generated revenues of $3.6 billion, down 33%, due to the softness of some of AMD’s biggest markets, including industry and telecoms.
But don’t get it wrong – gaming and built-in segments are dragged by AMD results, but investors should continue to focus on the performance of the AI business of companies in the data center and client segment. It comes from.
Image source: Getty Images.
AMD stocks look attractive prices
AMD shares sank last week following the release of full-year results for 2024. This cites seasonality as the company forecasts a sequential decline of 7% in its first quarter of revenue for the 2025 (CHIP business is cyclical in nature). However, it wasn’t all the bad news as management still expects strong growth for AI-powered data centers and client companies over the quarter.
The inventory is currently sitting near a low of 52 weeks, and its ratings are beginning to look very appealing. The company distributed $3.31 in earnings per share (EPS) in 2024, placing the stock price at a price-to-revenue ratio (P/E) of 32.5. So it’s considerably cheaper than Nvidia, which trades at P/E of 50.8.
Additionally, Wall Street consensus estimates (per Yahoo!) suggest that the company’s EPS will rise 43% this year to $4.75, offering just 22.6 forward P/E. In other words, it will need to rise by around 40% this year to maintain its current P/E.
However, given the big margin that AMD has broken Lisa SU’s initial forecast for GPU sales in 2024, coupled with her expectations for future sales, the company’s in 2025 was expected. There are all the opportunities that can bring even better results.
Nevertheless, the AI revolution is still in its early stages, especially when it comes to computers and devices. Therefore, while 49% DIP of AMD stocks appears to be a great buying opportunity, investors need to maintain their long-term position for over 5 years to maximize their chances of achieving positive returns. there is.
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Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. Anthony di Pizio does not occupy any of the stocks mentioned. Motley Fools introduces and recommends advanced microdevices, HP, Meta platforms, Microsoft, and Nvidia. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
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