Not all chip stocks have skyrocketed recently.
Over the past year, many semiconductor stocks have witnessed the benefits of meteors thanks to the ongoing happiness surrounding artificial intelligence (AI). Stock prices in Nvidia, Taiwan Semiconductor Manufacturing and Broadcom have risen by around 80% over the past 12 months.
However, one name for the chip area that appears to be unable to appeal to investors is advanced micro devices (AMD) 2.92%))the stock fell 36% last year.
Below we analyze AMD’s fourth quarter and full year 2024 revenue report. The results can be a little difficult to navigate, but there are many possibilities on AMD’s long-term roadmap. It explains how the company is making prominent intrusions in the AI realm, and argues why it appears to be a great opportunity to buy DIPs on AMD stock.
AMD’s revenue was mixed bags, but…
I think the surface-level explanation of why stocks such as Nvidia and Taiwan have consistently risen all the way through last year is because the business outcomes of each company are accelerating across the board. It is generally a good recipe to attract enthusiasm from investors.
Conversely, AMD’s financial profile is difficult to measure. Of those four motion segments, two are growing in epic ways…and the two are slowing down at amazing speeds. For this reason, AMD’s overall growth rate looks very mediocre compared to its chip peers.
All in 2024, AMD revenues increased 24%, while net profit increased 42%. It’s a great picture, but considering the game and embedded segments have dropped by 59% and 13% respectively, I doubt what AMD would look like if all of its major businesses are in a strength position It’s difficult not to think about it.
I understand that perspective, but I think it’s shortsighted. Remember that the semiconductor industry is extremely cyclical. For this reason, it is not uncommon to witness companies such as AMD falling and flowing into certain operational categories. For me, the real concern is whether the company’s long-term narrative appears to be robust or weak.
Image source: Getty Images.
…It seems there’s better news than bad news
My personal focus is on data center business. This is part of a company that has provided data centers with advanced chipware known as Graphic Processing Units (GPUs). For most of the past two years, Nvidia has been a major player in town when it comes to data center GPUs.
However, a close analysis of AMD’s financial results suggests that the company is making significant progress in itself. In 2024, AMD’s data center business generated $12.6 billion in sales. This is an increase of 94% from the previous year. Is it even better? The unit’s operating profit has almost tripled. To put this into perspective, AMD’s data center business increased 7% year-on-year in 2023, with operating profit actually falling by more than 30%. This is a huge change in just one year.
So, what has changed? AMD released the MI300X accelerator in December 2023. This product served as a pivotal shift for AMD. This has all been reduced because it has a GPU that can compete more directly with what NVIDIA offers.
Last year, AMD infiltrated Microsoft, Meta Platforms, Oracle and others to provide MI300 chipware to each of these companies, in addition to their existing NVIDIA hardware stack. Recent comments from leadership from Microsoft and Meta have largely meant that investments in AI infrastructure will continue, and we consider these commitments to be a positive force for AMD.
AMD stock now looks cheap to get dirty
Currently, AMD is traded at multiples of 24 (P/E), essentially the same as the average forward P/E of the S&P 500. The average between these multiples looks at the parity between these multiples as a suggestion. Investors see AMD’s position as carrying the same upside down as throwing money into an index that tracks the S&P 500.
In light of the myriad expanding markets under the AI umbrella, combined with the importance of chip revitalizing in delivering the power of these applications, justifying investments in AMD on a broader market equivalent It’s difficult. Given how quickly the company has grown its data center business, it’s even more bullish about AMD’s potential to disrupt players like Nvidia in the future.
I now consider this a great opportunity to buy dips on AMD stocks, hand over fists and prepare to hold them for long term.
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. Adam Spatacco has positions for Meta Platforms, Microsoft, and Nvidia. Motley Fool recommends advanced microdevice, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwanese semiconductor manufacturing. Motley Fool recommends Broadcom and the following options are recommended: A $395 call at Microsoft for January 2026 and a $405 call at short term Microsoft for January 2026. Motley Fools have a disclosure policy.
