Most investors in the technology sector are keeping an eye on the trends and developments surrounding the name artificial intelligence, especially building the infrastructure needed to allow these models to function and grow from the data they are fed. Investors in the semiconductor industry who are in charge of are paying attention. The darling of this industry is NVIDIA. NASDAQ:NVDABut there are signs that new competitors may be knocking on the door of new mass gatherings.
NVIDIA dominated the artificial intelligence and semiconductor space from 2024 to most of 2023, but some might say it has gotten too expensive as valuations have reached stratospheric highs. Future growth rates predicted by Wall Street analysts aren’t high enough to justify today’s valuations, much less valuations higher than that. Knowing this, investors may look to other stocks in this space for a better risk-to-reward setup.
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Current advanced micro devices
advanced micro device
(As of 11:16 a.m. Eastern Time)
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$227.30
PER113.55
Target price $191.96
And that’s exactly where the stock of Advanced Micro Devices Inc. (NASDAQ: AMD), also known as AMD, comes into play.
Comparing key valuation ratios to its peers highlights how well AMD offers a good setup for potential purchases.
Wall Street analysts agree, and even institutional investors see good reason to buy stocks ahead of the new year.
Why is AMD stock outperforming its peers right now?
Stock prices are typically determined by two factors. That’s the interest in the stock from the broader market and its earnings per share (EPS). Once this foundation is in place, investors will be able to evaluate whether a stock has a market advantage or a disadvantage.
This is where price action becomes important. There is a huge gap between AMD stock, which is currently trading at 55% of its 52-week high, and NVIDIA stock, which is still trading at 92% of its 52-week high. For investors, it’s safe to say that NVIDIA has won the popularity race in today’s market.
But what about tomorrow? That’s where future fundamentals start to matter, and AMD seems to have built up enough evidence that it could be a better buy in that space than NVIDIA is today. First, Wall Street’s EPS expectation for the next 12 months is $4.91, representing a net increase of 48.3% from current EPS of $3.31.
Compared to NVIDIA’s $4.14 per share EPS forecast, underlying earnings would only increase by 41.3%, but AMD looks likely to inherit the market premium in this regard. However, a difference in growth rates of less than 10% is not a good reason to buy a stock. Evaluation must be considered.
In terms of forward price-to-earnings (P/E) ratio, or how the market values today’s earnings to tomorrow’s earnings, AMD is valued at 25.6x and NVIDIA’s multiple is 34.0x. This deep discount makes NVIDIA start to look a little expensive, but the trend doesn’t end there.
Comparing the two on a price-to-book (P/B) basis, NVIDIA stock trades at a massive 51.4x multiple, while AMD stock currently trades at just 3.9x. Looking at it this way, investors can see that NVIDIA’s comparable EPS growth doesn’t actually justify paying such a high multiple.
Wall Street wants to close the gap
Seeing these differences between AMD and industry leader NVIDIA, several Wall Street analysts realized that their careers and reputations could easily be on the line. The folks at Citigroup, in particular, rated AMD stock a Buy rating as of October 2024, and maintained it, this time with a $200 price target.
Today’s Advanced Micro Devices stock price prediction
$191.96
52.80% increasemedium purchase
Based on ratings from 31 analysts
High Forecast $250.00 Average Forecast $191.96 Low Forecast $155.00 Advanced Micro Devices Stock Price Forecast Details
For these views to prove correct, the stock would need to rise ~59% from today’s trading levels, not to mention near its 52-week high. While these forecasts are bullish, these analysts are not the only ones willing to share their optimism.
State Street institutional investors have decided to increase their holdings in AMD stock by 2.3% as of November 2024, reaching a current high of $11.5 billion, or 4.3% of the company’s ownership, and investors This will provide further bullish indicators. .
Even bears would be wise to bet against this stock, as the company’s short interest has declined by 8.8% over the past month, a sign of bearish capitulation in the face of all the bullish material in the market today. I know that.
Hear this before considering Advanced Micro Devices.
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