Advanced Micro Devices (NASDAQ:AMD) stock has struggled this year, lagging behind the meteoric rise of other AI-driven companies. While the AI sector has experienced explosive growth, AMD shares have slipped 8.5% year-to-date.
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This lackluster performance persists despite strong results, particularly in the data center segment. Over the past two years, AMD’s data center revenue has surged from $1.7 billion in Q4 2022 to $3.6 billion in Q3 2024, coinciding with the rise of ChatGPT and the broader AI revolution. During the same period, data center operating income has soared by 240%, reaching $1.04 billion.
Yet, the market response has fallen short of reflecting these achievements. According to top investor Yiannis Zourmpanos, this disconnect could present a compelling opportunity.
“AMD is solidifying its role as a core technology provider and capturing critical market share in next-generation AI-driven solutions,” argues the 5-star investor, who sits in the top 1% of TipRanks’ stock pros.
Zourmpanos highlights AMD’s successful partnerships with tech giants such as Meta, Microsoft, Oracle, and Amazon. For instance, Oracle has reported significantly enhanced performance per core and faster memory speeds thanks to AMD’s cutting-edge microprocessors.
“These performance-related improvements may continue to boost AMD’s product demand based on the efficiency required for cloud-native and enterprise workloads,” notes Zourmpanos.
On the other hand, the investor also acknowledges that AMD’s gaming sector is losing steam, with profits having fallen more than 95% over the past two years. This could make it difficult for AMD to compete against companies like Nvidia, admits Zourmpanos. Likewise, prospects are dimming for AMD’s embedded segment, meaning that “AMD’s reduced influence may limit its gains in automotive and industrial IoT areas.”
All that being said, the investor is not scared off by these weaker-performing segments, as AMD’s gaming and embedded divisions are responsible for only 7% and 14% of total revenues, respectively.
“In contrast, the Data Center segment alone makes up over 50%, underscoring that AMD’s primary growth is driven by its AI and data center markets, lessening the impact of challenges in Gaming and Embedded,” the investor summed up.
Convinced of AMD’s long-term potential, Zourmpanos has decided to “double down” on AMD stock, assigning it a Strong Buy rating. (To watch Zourmpanos’ track record, click here)
Wall Street shares his optimism. Among analysts, AMD claims a consensus Strong Buy rating, with 26 Buy and 7 Hold recommendations. Its average 12-month price target of $187.04 suggests an upside of ~39%. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
