The rise of Advanced Micro Devices (AMD) stocks by 10% in a mere month may have investors rubbing their eyes in disbelief, as the company has managed to outshine the Computer & Technology sector’s returns by 0.3%.
AMD’s trajectory of success can be largely attributed to the stellar performance of its Data Center segment, with revenues shooting up by a staggering 114.5% year over year in the second quarter of 2024, an impressive feat which accounted for almost half of the total revenues, growing sequentially by 21%.
As the company bids farewell to the second quarter, boasting of over 900 public cloud instances and major players like Netflix and Uber opting for its fourth-gen EPYC public cloud instances, the landscape looks increasingly rosy for AMD.
The era of Data Center dominance has certainly given AMD a seat at the table, as evidenced by crossing the $1 billion mark in quarterly revenues for the first time in the data center AI sector.
With a customer pipeline that remains steady and strong partnerships with industry giants like Microsoft, Oracle, and others, AMD seems to be locking horns with opportunity as its ally.
The Competitive Edge of AMD Stock
The strategic moves of AMD are not veering off course, as its acquisitive nature is geared towards narrowing the technological gap with NVIDIA in the relentless AI race. With a slew of acquisitions amounting to $125 million in the past year and a robust acquisition of Silo AI and ZT Systems, AMD’s dominance in the data center AI market is looming large.
The ZT Systems acquisition, expected to sew up in the first half of 2025, signals a promising expansion of AMD’s data center AI realm, tipping the scales towards a projected $400 billion market by 2027.
But is this rise sustainable? The insatiable appetite for GPUs in the AI space seems to spell only good news for AMD and NVDA, with the former making strides particularly in the data center market with initiatives like the Instinct MI325X accelerator.
Riding the Data Center Wave
While frolicking in the sunshine of AI-fueled demand, AMD is not one to rest on its laurels. The company’s Audit Analytics segment bursts forth with growth, as evidenced by the company’s optimistic outlook for the third quarter of 2024, expecting revenues to stretch to about $6.7 billion – a whopping 16% year-over-year boost.
Although the overvaluation of AMD stock with a Value Score of F raises eyebrows, the forward 12-month Price/Sales ratio of 7.98X casts a shade of doubt when compared to the sector’s 6.23X. Yet, the potential for growth in AMD’s expanding portfolio cannot be dismissed.
Final Verdict
As investors ponder their next move with AMD stock, the tale seems to unfold with a mix of optimism and caution. The company’s recent acquisitions and dynamic growth potential are like fuel for a rocket, poised for ascension.
Nevertheless, the stock’s near-term future appears somewhat gloomy amidst challenges in the Gaming segment and intense rivalry with NVIDIA. While the growth-oriented investor may feel a pang of disappointment seeing AMD’s Growth Style Score of D, the stock’s current Zacks Rank of #3 (Hold) indicates that the best is yet to come, urging investors to bide their time for a more opportune entry point.