Advanced Micro Devices (NASDAQ:AMD) faced a challenging market throughout much of the last year. The AI chipmaker – despite delivering record-breaking revenues in its latest quarter – struggled to step out of the shadow cast by the industry-dominating Nvidia. The struggle has taken its toll, with AMD shares sliding ~19% over the last twelve months.
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Yet, one investor, known by the pseudonym Tangerine Tan Capital, believes the market is making a big mistake by underestimating AMD.
“In the long run, I think AMD will outperform the market again because the fundamentals are just too good,” asserts the investor.
Tangerine believes that AMD has the wind at its back in a number of different ways, both internally and due to broader industry trends.
A prime example is the company’s growth in data center revenues, highlighted in its Q3 report, where revenue surged 122% year-over-year. Tangerine is confident this high-margin segment will continue to thrive, offsetting weaker performance in AMD’s client and gaming divisions. Moreover, the investor emphasizes how rare it is for a company of AMD’s scale to have its largest division also be its most profitable.
When it comes to lagging behind Nvidia, Tangerine is not that concerned. The investor notes that AMD possesses the edge over Nvidia in a couple of key ways, giving AMD’s open-source solutions, cost-effectiveness, and energy efficiencies as examples.
Recent acquisitions will also help AMD to better position itself to scrape away at some of Nvidia’s market share, Tangerine posits, citing the purchases of Xilinx and ZT Systems. “I see both acquisitions as value adding, as they are exactly what AMD needs to compete or gain market share against NVIDIA,” the investor opined.
Looking more broadly, Tangerine notes that the “AI party” will likely continue unabated in the coming years. According to Tangerine, this will certainly benefit AMD, as it produces some of the most “sought-after products” available.
“The market is going to be wrong about AMD and does not recognize what an outstanding company AMD is,” concludes the investor, who rates AMD shares a Buy. (To watch Tangerine Tan Capital’s track record, click here)
Wall Street analysts seem to agree that AMD is undervalued. With 21 Buy, 9 Hold, and 1 Sell recommendations, AMD boasts a consensus Moderate Buy rating. Its 12-month average price target of $173.28 implies ~44% upside in the year ahead. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
