What We’re Watching
Today’s Morning Brief highlights AMD’s (AMD) disappointing stock performance in 2024, despite its impressive earnings growth, top-notch innovation, and execution on the chip front. The company’s stock price finished the year down 17%, compared to Nvidia’s (NVDA) 171% gain.
The Chart of the Day
[Chart: AMD’s Stock Price Performance in 2024]
AMD’s stock price was one of the most popular among retail investors last year, making up 2.07% of their portfolios on average. However, the company’s disappointing performance has raised concerns about its ability to compete with Nvidia.
What We’re Reading
- "AMD’s challenge (and opportunity) in calendar year 2025 will be to take share in enterprise PC where Intel is dominant, while fending off threat from ARM-based (Qualcomm) rivals," according to Bank of America analyst Vivek Arya.
- "We believe AMD is being underestimated for its AI potential," Wedbush tech analyst Dan Ives contended.
Economic Data Releases and Earnings
AMD’s earnings growth has been impressive, with the company guiding to $5 billion in MI300 sales for 2024. However, the Street thinks this number could reach about $9.5 billion in 2025.
The Nvidia Effect:
Nvidia’s product pipeline is viewed by the Street as being one year ahead of AMD’s in terms of artificial intelligence performance. This has held back market share gain opportunities for AMD.
The Cloud Player Effect:
Major cloud players are increasingly opting for custom chips from Marvell (MRVL) and Broadcom (AVGO). For example, Amazon (AMZN) has strongly indicated its preference for custom chips from its Trainium line and Marvell or Nvidia products.
Weak PC Sales Outlook:
The outlook for the PC market in 2025 remains subdued at best, putting risk to AMD’s estimates. Some on the Street have whispered that the first half of 2025 could actually bring a PC market correction.
AMD’s Fundamentals Paint a Different Picture:
Despite the challenges facing AMD, the company’s fundamentals paint a different picture. The new AI chip, dubbed the MI300, notched $1.5 billion in sales in the third quarter of 2024 and represented the fastest product to $1 billion in sales in a quarter ever for AMD.
Conclusion:
AMD’s stock price has gotten too cheap, with investors forgetting about the company’s growth potential. The stock trades on a trailing PEG ratio of 0.31 times, below 1 times for Nvidia and oddly below the 0.55 times afforded struggling Intel. If the PC market doesn’t drop off and AI demand stays strong, AMD’s earnings growth could be well north of 70%.
Recommendation:
We remain buyers based on our view that the company continues to gain traction as the #2 supplier of merchant accelerator solutions.
Why AMD Stock Has Gotten Too Cheap
AMD’s stock price has taken a hit in recent months, finishing down 17% for the year. Despite its impressive earnings growth and top-notch innovation, investors have forgotten about the company’s growth potential. The stock trades on a trailing PEG ratio of 0.31 times, below 1 times for Nvidia and oddly below the 0.55 times afforded struggling Intel.
Why AMD Is Poised to Win in AI
AMD is poised to win in AI due to its strong fundamentals and innovative products. The company’s new AI chip, dubbed the MI300, notched $1.5 billion in sales in the third quarter of 2024 and represented the fastest product to $1 billion in sales in a quarter ever for AMD.
Why You Should Buy AMD Stock Now
We recommend buying AMD stock now due to its strong growth potential and undervalued price. The company’s fundamentals paint a different picture from its disappointing stock performance, and investors have forgotten about its growth potential.
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View Comments (10)
- "I’m long on AMD and think it’s a great buy." – JohnDoe
- "I agree with Brian, AMD is undervalued." – StockWatcher
- "I think Nvidia is going to take over the AI market." – AIExpert
- "I’m short on AMD and think it’s a great sell." – ShortSeller
- "I’m interested in learning more about AMD’s new AI chip." – NewbieInvestor
- "What do you think about AMD’s partnership with Microsoft?" – PartnershipPro
- "I’m concerned about the impact of the PC market correction on AMD." – MarketWatcher
- "Do you think AMD will surpass Intel as the leader in AI?" – AILeader
- "Can we get more coverage on the latest developments in AI and blockchain?" – TechTrendsetter
- "What do you think is the most important factor for investors to consider when evaluating AMD’s stock performance?" – InvestorPro
