For quite some time now, analysts, including myself, have tipped AMD (AMD) as a genuine candidate to rival Nvidia’s (NVDA) undisputed dominance in the AI chip sector. While it hasn’t come to fruition yet, the fundamentals are there for all to see, and it seems that 2025 will be the year AMD will finally breach the barriers holding it back. With the tech giant’s recent performance and strategic positioning, there’s much to be excited about.
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Oliver Rodzianko, our analyst at Tipranks, has expressed his strong bullish sentiment on AMD, and you can read it right here.
For now, though, here are three key reasons why AMD is set to shine in 2025:
- Strong Growth in the AI Data Center Market: AMD has been making crucial progress in the AI data center market, a sector that’s expected to see substantial growth in the coming years. The company’s Data Center saw a mouthwatering 122% year-over-year revenue growth in Q3 2024. With new products like the MI350 series to launch in late 2025, AMD is in a good place to capture a larger share of this lucrative market. This growth is not just a short-lived success, it’s a sign of AMD’s strategic focus on long-term AI demand.
- Attractive Valuation and Margin of Safety: AMD’s stock price has dropped by approximately 35% in the last six months, creating a potential buying opportunity. However, Rodzianko believes that the valuation model suggests that the stock could deliver a 35% compound annual growth rate in price over the next three years. With a current price-to-earnings ratio of just over 100, down from around 400 in March 2024, and a price-to-sales ratio of 7.8, AMD offers investors a 35% margin of safety. This makes it an attractive option for those looking to capitalize on its growth potential.
- Strategic Focus on AI Inference Market: While Nvidia dominates the AI infrastructure market, AMD is carving out a niche in the AI inference market. This segment requires different computational capabilities and is expected to experience more stable, long-term growth. By focusing on AI inference, AMD aims to benefit from less cyclical dynamics and more sustained demand. This strategic move will likely pay off as the company releases products tailored to this market.
Is AMD a Buy, or a Sell?
Despite the growing belief in AMD’s fortunes, on Wall Street, the stock is considered a Moderate Buy, with a price target of $172.24. This represents a 41.81% potential upside.
AMD Sets High Expectations
AMD’s strong growth in the AI data center market, attractive valuation, and strategic focus on the AI inference market position it for growth in 2025. Our analyst believes these factors will drive AMD’s success in 2025. Of course, a lot can happen, but the fundamentals are in place for continual growth, so even if catching Nvidia seems unrealistic in the short term, this year could become the year AMD makes a significant jump forward.
