TLDR
- AMD will report Q1 2025 financial results on May 6, with focus on AI chip progress
- Stock currently trading 54% below 2024 record high, affected partly by Trump tariffs
- New MI350 series GPUs with CDNA 4 architecture offer 35x performance increase
- Oracle plans to build cluster of 30,000 MI355X GPUs, signaling strong demand
- Some investors see AMD as undervalued with strong growth potential despite challenges
Advanced Micro Devices is gearing up for its first quarter 2025 earnings report on May 6, a crucial moment for investors watching the company’s progress in the AI chip market.
The stock has fallen 54% from its 2024 high, creating what some see as a buying opportunity. Recent tariffs imposed by President Trump have added uncertainty, though semiconductors received exemptions.
AMD’s data center segment showed impressive 94% growth in 2024, reaching $12.6 billion in revenue. GPU sales alone accounted for $5 billion, with CEO Lisa Su predicting this figure will reach “tens of billions” in coming years.
New Products Challenging Nvidia
The company’s AI strategy centers on its MI300X GPU launched in late 2023, which quickly won over major tech companies like Microsoft, Meta Platforms, and Oracle.
Some customers found it offered better performance and lower costs compared to Nvidia’s H100 chips. AMD has since introduced the more powerful MI325X and is preparing to ship the new MI350 series.
These chips are based on the company’s CDNA 4 architecture, which provides a remarkable 35x performance increase over previous generations.
The MI350 series is expected to rival Nvidia’s Blackwell architecture, currently the industry benchmark. AMD began sending MI350 samples to customers in Q1 2025, with production ramping up mid-year.
Mixed Business Segment Performance
While data center revenue soared in 2024, AMD’s performance across segments was mixed. The client segment grew 52% year-over-year to $7 billion, driven by Ryzen AI chips for personal computers.
However, the gaming segment struggled with a 58% revenue decline. The embedded segment also faced challenges, with revenue down 33% due to weak demand in communications and industrial markets.
A recovery may be underway in gaming with the recent release of the Radeon 9070 GPU, which many customers had been waiting to purchase.
If AMD can return these segments to growth while maintaining momentum in AI, 2025 could be a record year. Oracle’s recent announcement to build a cluster of 30,000 MI355X GPUs suggests strong demand for AMD’s upcoming products.
This could be a sign of similar moves from other major customers.
Valuation and Market Position
AMD stock currently trades at a price-to-earnings ratio of 28.2, representing a 31% discount to Nvidia’s P/E of 37.1. Based on Wall Street’s average earnings forecast of $4.65 per share for 2025, AMD trades at a forward P/E of just 20.1.
This valuation has attracted attention from analysts and investors. One investor known as “The Asian Investor” called AMD shares “an absolute steal” at current prices.
The company faces some headwinds from Trump’s tariffs on goods imported to the US. While semiconductors are exempt, many of AMD’s customers may face higher costs, potentially reducing their AI infrastructure budgets.
This creates uncertainty about whether Lisa Su will increase her 2025 sales forecast when reporting Q1 results. Wall Street remains optimistic overall, with AMD enjoying a “Moderate Buy” consensus rating.
The 12-month average price target of $144.77 implies approximately 52% upside potential. Despite near-term volatility, many analysts believe investors with a three-to-five-year horizon could benefit from buying at current prices.
AMD is scheduled to unveil its Instinct MI350 AI accelerator in mid-2025, followed by the MI400 AI in 2026. These products represent potential catalysts that could drive significant revenue growth.
The May 6 earnings report will be closely watched for updates on production schedules, customer demand, and revised forecasts for 2025.
Investors will particularly focus on any comments about AI chip sales and the impact of recent tariffs.
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