TLDR
- AMD stock has fallen ~40% over the past 12 months despite record Q4 2024 revenues
- The company plans to launch its next-generation MI350 AI accelerator in mid-2025
- Data Center segment showed strong growth with 175% year-over-year EBIT increase in 2024
- Some investors see the recent price drop as an attractive buying opportunity
- AMD continues to gain market share in the server CPU market with its EPYC portfolio
Recent Performance Challenges
AMD stock has experienced a challenging year. Despite playing a central role in supplying AI chips and delivering record revenues in Q4 2024, shares have tumbled approximately 40% over the past 12 months.
This decline comes amid several market headwinds. Concerns over slowing capital spending by hyperscalers have impacted investor sentiment.
Export restrictions to China have created additional uncertainty. The potential for a trade war has further dampened enthusiasm for the semiconductor sector.
AMD’s guidance for Q1 2025 was also received lukewarmly by investors. This cautious outlook added to the market’s concerns about the company’s near-term growth prospects.
Strategic AI Initiatives
Despite these challenges, AMD isn’t standing still. The company is actively doubling down on its artificial intelligence ambitions.
AMD is working to expand its presence in the rapidly growing data center market. This segment represents a key growth opportunity for the company.
The company’s next-generation AI accelerator, the MI350, is scheduled for a mid-2025 launch. This product is expected to provide a significant improvement in AI performance capabilities.
CEO Lisa Su has highlighted strong customer demand for these upcoming products. She also noted accelerated development progress during the Q4 earnings call.
AMD has been consistently gaining market share in the server CPU market. The strength of its EPYC portfolio has been a key driver of this success.
Investment Perspective
Some investors see opportunity in AMD’s recent stock price decline. They view the pullback as potentially offering an attractive entry point.
One such investor, known by the pseudonym Oakoff Investments, maintains a positive outlook on AMD. They highlight the company’s strong fundamentals and promising AI and data center growth.
Oakoff doesn’t see any major risks to AMD’s CPU dominance in the next few years. They believe the company is well-positioned in the current semiconductor environment.
The Data Center segment has been a bright spot for AMD. This division saw EBIT growth of 175% year-over-year for full-year 2024.
Data Center revenues also expanded by 69% year-over-year in Q4 2024. This growth reflects AMD’s successful strategy of shifting toward this lucrative segment.
Strong Buy rating
Oakoff notes that AMD is “quite well positioned” to benefit from demand from AI infrastructure builders. They have assigned AMD a Strong Buy rating based on this assessment.
Wall Street generally shares this positive outlook on AMD. The stock currently has 25 Buy ratings, 11 Hold ratings, and just one Sell rating.
This balance of analyst opinions gives AMD a consensus Moderate Buy rating. The 12-month average price target stands at $147.81.
If achieved, this price target would represent a potential upside of approximately 39% over the next year. This suggests analysts see significant recovery potential despite recent challenges.
AMD is competing with Nvidia in the data center GPU market. While Nvidia maintains a dominant position, AMD continues to position itself as a strong alternative supplier.
AMD provides multiple components for data centers, including GPUs. These processors serve as the computing muscle behind many AI models currently being deployed.
The company’s diverse product portfolio helps it capture value across different segments of the AI hardware market. This diversification provides some protection against segment-specific downturns.
AMD’s continuing innovations in CPU and GPU technology should help maintain its competitive position. The upcoming MI350 series represents the company’s latest effort to close the gap with competitors.
With AI infrastructure demands continuing to grow, AMD remains positioned to benefit from this long-term trend. The current stock price may not fully reflect this growth potential.
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