Nvidia has cornered the market for AI chips and further evidence of its incredible success was on display in its recent earnings report, which once again featured a beat-and-raise readout.
While you might think that spells doom for other companies vying for a lucrative piece of the AI pie, that’s not necessarily the case for one company.
That at least is the opinion of JR Research, a 5-star investor ranked in the top 1% of TipRanks’ stock experts, who thinks Nvidia’s strong AI read indicates broader growth opportunities, particularly benefiting Advanced Micro Devices (NASDAQ:AMD).
It’s clear now that the AI hype is way more than just that, and has “turned into a sustainable AI upcycle.” But AMD has been playing it safe and even though it has raised its AI data center revenue guide for FY2024 by $500 million to more than $4 billion, that outlook is “expected to be conservative, lowering its execution risks.”
Caution aside, AMD CFO Jean Hu has highlighted the strong demand for accelerated computing, noting the company “has over 100 customer engagements at various stages, including POC, qualification, lab production, and ramp.”
Additionally, AMD hinted that its estimate for AI revenue is somewhat conservative, as Hu indicated that the company has “supply commitments in place to drive revenues significantly above the $4B target for the year.” With Nvidia anticipated to face supply constraints until 2025, JR believes AMD has the opportunity to “capitalize on gaining market share if it executes more effectively.”
JR also thinks hyperscalers are probably happy having AMD as a viable alternative to Nvidia, thereby fostering “healthy competition and avoiding undesirable lock-in into Nvidia’s full-stack but proprietary ecosystem.”
The anticipated improvement in the automotive and industrial sectors is also likely to create a more favorable environment for AMD’s embedded business in the second half of the year. Furthermore, the AI PC refresh “reignited” by Microsoft is expected to generate strong momentum for AMD’s Client business through 2027.
So, with all that in mind, is now the right time to consider investing in AMD shares?
“Given the solid consolidation phase over the past four to five weeks, I’m ready to reassess my thesis on AMD, as it looks primed for a recovery of its uptrend continuation thesis,” says JR. This reassessment has led JR to upgrade AMD stock from a Hold to a Buy rating. (To watch JR Research’s track record, click here)
Most Wall Street analysts back JR’s thesis. Based on 29 Buys vs. 6 Holds, the consensus is that AMD stock is a Strong Buy. Going by the $192.56 average price target, a year from now, investors will be sitting on returns of 11%. (See AMD stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
