Advanced Micro Devices (AMD) has been in the spotlight lately due to significant stock price volatility. AMD stock has dropped around 11%, largely due to concerns over DeepSeek’s low-cost AI model and disappointing Q4 Data Center revenue. Following this decline, AMD seems undervalued compared to its peers, especially given the growth potential in its Data Center business. Also, AMD’s long-term prospects remain robust, which makes it worth considering by long-term investors.
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AMD Stock Appears Undervalued Compared to Sector
AMD’s current forward price-to-earnings (P/E) ratio of 22.66x, is trading at an 11.13% discount to the sector’s median of 25.74x and a significant 46% discount to its five-year average of 41.97x. This suggests that AMD stock is undervalued compared to its peers and its past performance.
Investors should note that the forward P/E ratio evaluates a company’s current stock price relative to its expected adjusted earnings per share (EPS) for the upcoming year.
AMD Gains Traction in Data Center Market
AMD remains a major player in the semiconductor industry, known for its cutting-edge processors and graphics technologies. The company is gaining traction in the data center market with its MI300 accelerators, securing strong demand from major players like Microsoft (MSFT) and Meta Platforms (META). This positions AMD to compete effectively with Nvidia (NVDA), the current market leader in the data center market.
Also, growing demand for cloud computing power is benefiting AMD. As businesses are shifting their operations to the cloud, the need for high-performance server chips has soared, boosting AMD’s growth.
Is AMD a Good Stock to Buy?
Turning to Wall Street, AMD stock has a Moderate Buy consensus rating based on 24 Buys, 12 Holds, and one Sell assigned in the last three months. At $147.14, the average Advanced Micro Devices stock price target implies 36.8% upside potential. Shares of the company have declined 21.4% in the past six months.
