As we bid adieu to the first half of 2024, the fervor surrounding artificial intelligence (AI) may have dimmed somewhat, but the lucrative growth prospects it affords semiconductor firms remain undeterred. Among these, Advanced Micro Devices (AMD), a stalwart in the industry, has garnered acclaim for its trailblazing processors and graphics cards. In the past year, it rode the crest of the AI wave, surging by 127% and eclipsing the S&P 500’s modest 25% ascent.
Fast forward to the present; AMD stock has logged a mere 10% uptick, lagging behind the Nasdaq Composite’s 18% surge. Despite this, the hallowed corridors of Wall Street echo with resounding “strong buy” endorsements for the stock. Can AMD replicate its stellar performance from the previous year?
AMD’s Financials Are Strengthening
While Nvidia’s (NVDA) dominion over the semiconductor realm endures unchallenged, AMD has been diligently narrowing the gap. Noteworthy strides in the CPU and GPU sectors, propelled by Ryzen processors and Radeon graphics cards, underscore the company’s ascendancy.
Significantly, AMD’s data center arm has rebounded robustly, with a striking 80% revenue upsurge to $2.3 billion in the first quarter of 2024. Concurrently, the Client segment witnessed an 85% revenue surge to $1.4 billion.
This commendable growth stems from heightened MI300 AI accelerator shipments and an enthusiastic embrace of AMD’s AI-driven Ryzen and EPYC processors. However, the Gaming and Embedded segments witnessed a 48% and 46% decline in revenue, respectively, vis-a-vis the preceding year’s quarter. Despite this, overall revenue scaled up by 2% to reach $5.4 billion. Adjusted net income also painted a rosier picture, standing at $1.0 billion in contrast to a $970 million loss in the year-ago quarter.
Reflecting on the Q1 outcomes, CEO Dr. Lisa Su accentuated AMD’s strides in augmenting the data center business and fortifying AI capabilities across its product spectrum.
Furthermore, strategic alliances with industry stalwarts like Lenovo, Dell Technologies (DELL), Super Micro Computer (SMCI), and Sony Semiconductor Solutions showcase AMD’s commitment to broadening its AI footprint across diverse markets – ranging from cloud and automotive to enterprise and PC domains.
For the impending second quarter, revenue projections hover around $5.7 billion, in harmony with analysts’ anticipations. Although full-year guidance remains undisclosed by management, pundits foresee a revenue surge of 12.7% and 27.8% in 2024 and 2025, respectively. Earnings are also poised for an upward trajectory, with growth estimates pegged at 32.1% in 2024 and an even heartier 58.8% in 2025.
What’s Wall Street’s Outlook on AMD Stock?
Lately, Stifel analyst Ruben Roy reaffirmed a “buy” rating on AMD stock, setting a price target of $200. Roy’s sanguine outlook underscores the short-term tailwinds awaiting AMD, including “AI-infrastructure investment,” sustained x86 CPU market share gains, and an imminent “AI-driven PC refresh cycle.”
Further adding to AMD’s accolades, BofA Securities crowned it among the cream of the crop for Q3 2024. These top-tier selections boast qualities of “best of breed” stocks owing to their superior quality, liquidity, earnings growth, and margin potential compared to industry peers.
Empowered by its burgeoning financials, AMD enjoys the favor of the majority of analysts, who endorse it as a resounding “strong buy.” Out of the 35 analysts monitoring the stock, 28 advocate a “strong buy” stance, with one “moderate buy” recommendation and six “hold” ratings.
The average target price of $193.84 harbors the promise of a 19.5% upswing in the ensuing 12 months. Meanwhile, the lofty high target price of $265 alludes to a meteoric 63.4% surge from present levels.
The Bottom Line on AMD Stock
The burgeoning embrace of cloud computing, AI, and 5G technologies exemplifies the unabating demand for cutting-edge processors and GPUs. While the gaming division faced hurdles in Q1, the auspicious positioning of AMD’s Ryzen processors and Radeon GPUs bodes well for capitalizing on the burgeoning gaming sector.
The cutthroat semiconductor landscape sees nearly every financially endowed player enhancing their products with AI capabilities. To consolidate and expand its market share, AMD must perpetuate its legacy of innovation and flawless execution.
With a robust product suite, strategic acquisitions, and an unwavering commitment to advancing computational prowess, AMD emerges as a potent contender in this arena, solidifying its stance as one of the premier AI stocks worth considering for discerning investors.