To Buy or Not to Buy? Analyzing AMD's Current Stock Performance

AMD Stock Analysis: Should You Buy Now?

The previous year was difficult for investors, and a sell-off highlighted how crucial it is to hold stocks for the long term, regardless of market conditions.

For instance, with a slump in the PC industry, shares of Advanced Micro Devices (AMD -0.10%) fell by 55% during the course of 2022. However, Wall Street has increased the stock by 43% in 2023 because to its optimism regarding the firm’s involvement in fast-growing sectors including data centres and artificial intelligence. (AI). As a result, the recent surge in AMD won’t have helped those who sold last year.

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The business has a lengthy history of rewarding patient investors with significant growth; in fact, during the past five years, the stock has increased by 824%. Despite its setback in 2018, AMD’s prognosis is still favourable. Here are some reasons to buy the stock today.

AMD’s ability to diversify is a strength

A technological powerhouse, AMD is best known for its Ryzen central processing units (CPUs) and graphics processing units, which are used in consumer PCs. (GPUs). However, the business also has flourishing markets in data centres and embedded goods, as well as a bright future in AI.

Despite the tough economy, its position in numerous high-profit industries was the primary factor in its 44% increase in sales to $23.6 billion in fiscal 2022.

With its hardware powering servers all across the world, data centres are a growing source of revenue for AMD. In November 2022, the business introduced its Genoa series of data centre chips, with Microsoft Azure, Alphabet’s Google Cloud, and Oracle already on board as customers. The performance of new chips is encouraging for the segment’s long-term prognosis given that AMD’s data centre revenue increased 64% last year.

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In 2022, AMD finalised the acquisition of Xilinx, a provider of programmable processors for industries like aerospace, defense, artificial intelligence, and the auto industry. The acquisition expands the chipmaker’s diversification and enables it to work in a variety of new industries. Last year, practically all of the company’s growth in its embedded segment was driven by Xilinx, whose revenue increased by 1,750% year over year to $4.5 billion.

Due to AMD’s emphasis on diversification, its business has been strengthened, as evidenced by the revenue rise it had last year despite a market slowdown. The company’s decision to shift its focus to less consumer-dependent industries, such as data centres and embedded devices, would probably further protect its earnings and bring about significant advantages over the long run.

AMD is a superior investment than its rivals

The IT sector has a long history of being known for its abundance of growth stocks. Therefore, the case for AMD’s stock is strengthened by its position as a superior purchase than its market rivals, the biggest of which are Nvidia (NVDA 0.58%) and Intel (INTC -0.06%).

AMD’s diversity resurfaces in relation to Nvidia. Considering the potential of AI, Nvidia shares have increased 84% year to date. With an 88% market share compared to AMD’s 8%, the consumer GPU market still accounts for a significant portion of its revenue. In light of this, Nvidia’s 2022 revenue increased by 0.2% annually, a much lower percentage than AMD’s increase of almost 40%.

Due to its GPUs, Nvidia also has promising futures in data centres and AI, but AMD is a more dependable company due to its holdings in other areas and improved performance throughout the previous year’s economic pressures.

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Additionally, AMD has continually taken market share away from Intel as a result of the success of its Ryzen CPUs since their introduction in 2017. AMD’s CPU market share increased from 17.8% to 35.2% between the fourth quarters of 2016 and 2022, whereas Intel’s share decreased from 82.2% to 62.8% during that same period.

Between November 2022 and January 2023, the firms also released competing data centre CPUs. According to Bernstein analyst Stacy Rasgon, benchmarks reveal that AMD’s Genoa series surpasses Intel’s Sapphire Rapids line in general-purpose workloads.

AMD once again outperforms Nvidia and Intel in terms of forward price-to-earnings (P/E) ratios. Among its two main rivals, AMD’s stock presently provides the best value.

Analysts are paying attention to AMD because of its dominant position in technology and apparent yearly growth. On March 30, Wells Fargo raised its AMD price target from $85 to $120, representing a 32% increase over the stock’s current price. The company has a track record of phenomenal development, and its expanding positions in numerous key sectors should keep it thriving for decades. As a result, it makes sense to buy AMD stock today.

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