Semiconductor stocks are among the top candidates for investment opportunities in the artificial intelligence (AI) space. Nvidia has been the most popular chip stock for the past two years, and for good reason. The company’s graphics processing units (GPUs) play a critical role in generative AI development, and companies around the world can’t seem to take full advantage of what Nvidia has to offer.
While it remains a solid opportunity at the intersection of semiconductors and AI, I think there are other stocks that could be better value right now. Below, we will analyze current price trends centered on advanced micro devices. (NASDAQ: AMD). And I’ll explain why I think the company is well-positioned after years of solid growth, despite stiff competition from NVIDIA.
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What’s happening with AMD stock?
The chart below shows the price movements of AMD and many major semiconductor stocks, as well as the VanEck Semiconductor ETF, over the past year. Unlike its peers, AMD’s stock price has fallen significantly, with the stock hovering near its 52-week low as of January 14th.
AMD data by YCharts.
Given how essential the chip is to AI development, why is AMD stock plummeting even as its competitors receive overwhelming support from investors?
From what I’ve gathered, it appears that the bad feeling surrounding AMD comes down to growth, or lack thereof. Currently, the company’s sales are growing at a modest 18%. Compared to Nvidia, which has nearly triple-digit revenue growth, it doesn’t seem underwhelming. But I think investors are missing the forest for the trees.
Image source: Getty Images
AMD is probably growing faster than you think
AMD’s overall revenue growth may look slow when benchmarked against its competitors, but it’s important to consider the details before jumping to conclusions. The company breaks down its revenue into four main categories: datacenter, client, gaming, and embedded.
As of now, the company’s gaming and embedded segments are not growing at all. Unfortunately, this lack of growth is cannibalizing thriving business sectors. According to the company’s latest financial report, data center operations grew 122% year-over-year, which is about the same as the growth of Nvidia’s data center GPU division.
Despite this impressive growth, AMD’s price-to-earnings ratio (PEG) is just 0.3. This suggests that analysts may be overlooking how strong the company’s data center business is, leading to slower growth forecasts. Note that a stock with a PEG ratio of less than 1 generally means it’s undervalued.
Why I think AMD stock could break out in 2025
This year will be an interesting year for the chip sector. Investors and Wall Street analysts will be evaluating all the stats about Nvidia’s new Blackwell GPUs. This GPU is reportedly already sold out over the next 12 months. While this is good news for Nvidia on the surface, I think AMD has a big opportunity looming behind them.
So these supply and demand dynamics present an interesting opportunity for AMD in that it can compete on price and provide the best solution when companies can’t afford Nvidia’s GPUs. It’s no wonder we agree with this idea.
A big boost for AMD last year was the notable adoption of its MI300 accelerator by hyperscalers such as Oracle, Microsoft, and Meta Platforms. Each of these companies also relies heavily on Nvidia’s GPU architecture, but they are also making moves to diversify their AI infrastructure by supplementing their respective Nvidia stacks with products developed by AMD.
Given that AMD already has a line-up of successor chips scheduled for release in 2025-2026, the company has many alternative solutions to help navigate the ongoing fluctuations in demand across the semiconductor industry. I think there is ample opportunity to take advantage of it. Nvidia’s suite of products at a more affordable price.
To me, investors should focus on growth trends centered around AMD’s data center GPU segment. If the company can continue to profitably accelerate this particular part of its business, I think it’s only a matter of time before investors start to notice its size and the stock price starts to break out.
I think AMD is an attractive long-term opportunity for AI investors, and I think now is a good time to buy the stock given the ongoing price weakness.
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Adam Spatacco has held positions at Meta Platform, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
