In case you didn’t get the memo, Nvidia (NASDAQ:NVDA) is set to report its quarterly earnings results soon. It’s fine to be on the lookout for that, but don’t neglect Advanced Micro Devices (NASDAQ:AMD), as this company is also a chip champ of the 2020s. Overall, I am bullish on AMD stock now that it’s trading at a less extreme price level.
Advanced Micro Devices, commonly just referred to as AMD, is an American microprocessor manufacturer. The company’s CEO, Lisa Su, is almost given deity-like status among AMD’s fans because she has led the company during its recent, prosperous years.
Earlier this year, AMD was a darling of the financial market because the company took market share from some of its rivals. Today, however, all eyes are on AI chip superstar Nvidia. There’s nothing wrong with keeping tabs on Nvidia, but don’t lose sight of AMD’s impressive progress in a fiercely-competitive microprocessor market.
AMD Stock Finally Cools Down
AMD’s stock chart can help investors decide what their buy price might be. Combining chart-reading skills with fundamental analysis can definitely make you a more well-rounded and better-informed stock trader.
AMD stock declined today even though there was no obvious negative catalyst. With that, the stock is down substantially (around 20%) from its 52-week high of $132.83.
The problem is that many amateur traders hesitate to buy high-quality stocks when they go down 20%. Yet, that’s exactly the time when I like to get involved. After all, it’s not as if AMD is suddenly 20% worse than it was a few months ago. For instance, the company still has an excellent track record of EPS beats.
Furthermore, AMD already got its second-quarter earnings announcement out of the way (and it was another EPS beat, by the way). So, you won’t have to worry about AMD stock tanking on an earnings miss — unless Nvidia has a really bad earnings miss, which could drag AMD shares down because of what I call the “sympathy effect.”
Therefore, it’s fine to wait until Nvidia has reported its second-quarter earnings results before considering buying AMD stock. Just bear in mind, though, that an Nvidia earnings beat could send AMD shares higher as well.
AMD and Nvidia Both Get a Positive Review
Incidentally, I should remind everyone that this isn’t an either/or situation. At the end of the day, it’s entirely possible to own both Nvidia stock and AMD stock. On the other hand, I wouldn’t load up on both of these stocks since they’re in the same market sector, and portfolio diversification is important.
It can be fun and instructive, though, to compare Nvidia and AMD head-to-head. That’s basically what Raymond James analyst Srini Pajjuri recently did, as he compared and contrasted the two companies’ latest and greatest AI processors.
Apparently, Nvidia’s H100 AI processor and AMD’s rival MI300X AI GPU both feature intricate designs, cutting-edge manufacturing, and advanced 2.5D packaging. However, Pajjuri’s analysis reveals that the H100 costs around $3,300 to make, while AMD’s MI300X costs roughly $5,800.
Yet, the MI300X features higher HBM Memory and more complex packaging, so the higher price point may be justified. Furthermore, Pajjuri figures that AMD’s gross margin for the MI300X is over 85%, which therefore gives the company “enough buffer to price MI300X at a significant discount and still generate accretive margins.”
Is AMD Stock a Buy, According to Analysts?
On TipRanks, AMD comes in as a Strong Buy based on 25 Buys and seven Hold ratings assigned by analysts in the past three months. The average Advanced Micro Devices stock price target is $141.90, implying 33.8% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell AMD stock, the most accurate analyst covering the stock (on a one-year timeframe) is Gus Richard of Northland Securities, with an average return of 87.44% per rating and an 85% success rate. Click on the image below to learn more.
Conclusion: Should You Consider AMD Stock?
As you can see, Advanced Micro Devices might not have Nvidia’s market darling status now, but it’s still favored in the analyst community. Plus, Pajurri sees both companies as potential winners in the AI chip market. His $145 price target for AMD stock suggests substantial returns from the current share price.
So, feel free to wait for Nvidia’s earnings release with bated breath; I must admit, I’ll be watching and waiting for it as well. At the same time, remember to give AMD stock some consideration, as it’s a worthy wager on a still-great chip-market contender.
