Advanced Micro Devices (NASDAQ:AMD) had a year that can be described as a study in cognitive dissonance.
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Record revenues and rising operating margins – particularly in the highly valuable data center segment –failed to translate into higher share prices. While the rest of the AI sector appeared to be celebrating remarkable gains, AMD found itself sinking.
While there were some peaks – especially in the first half of the year – the losses began to mount as the months ticked by. All told, AMD shares ended up being down in the mid-teens for 2024 as a whole.
Disappointing revenue guidance for Q4 2024, along with weak gaming numbers and other concerns, contributed to these declines. Much of the stock’s subpar performance, however, can be attributed to its struggle to emerge from Nvidia’s industry-dominating shadow.
However, one investor, known by the pseudonym Value Edge, is not convinced that lagging behind other AI powerhouses is such a red flag.
“Despite being far behind Nvidia and Broadcom, AMD is still very much in the race for AI supremacy and is poised to benefit enormously from the ongoing build-out of AI factories globally,” the investor opined.
In fact, Value Edge sees plenty of opportunities for AMD to carve out a nice piece of the growing AI pie. The investor points to AMD’s ability to test Nvidia’s primacy on gaming hardware while also challenging Intel’s server CPU dominance.
When it comes to data centers, Value Edge readily acknowledges AMD’s difficulties competing with Nvidia’s superior CUDA software. And yet, the investor points out that AMD’s data center segment grew by triple digits last quarter, and is fast becoming the company’s largest revenue driver.
Moreover, lucrative data centers are not the only game in town when it comes to AI applications.
“At some point, AI chips will begin proliferating all consumer electronics, not just the high-end data center market that Nvidia owns,” the investor contends.
For Value Edge, the strong business case coupled with a “distinct undervaluation” combine to make AMD shares a Buy for 2025. (To watch Value Edge’s track record, click here)
Wall Street shares this optimism. With 24 Buy and 8 Hold recommendations, AMD boasts a consensus Strong Buy rating. Analysts’ 12-month average price target of $184.37 implies potential gains of nearly 42%, reflecting a bullish outlook for the year ahead. (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.
