Advanced Micro Devices, Inc. (NASDAQ: AMD) is witnessing a consistent rise in demand for its artificial intelligence chips and high-performance computing processors. However, the company’s stock market performance was lackluster in 2024, largely due to a cautious outlook and weaknesses in non-core segments such as Gaming.
In the last six months, AMD’s stock has dropped approximately 30%, continuing the downtrend that started early last year. Despite this, analysts are generally optimistic, predicting a 50% growth this year. Given the current low valuation following several years of volatility, AMD appears to be a promising long-term investment.
Focus on AI
One of AMD’s key strengths lies in its innovative capabilities. The company is enhancing its AI processor lineup as it aims to compete with industry leaders like Nvidia, which currently holds a dominant position in the GPU market. With significant enterprise investment in AI infrastructure, AMD is well-positioned to capitalize on emerging opportunities in this sector.
Moreover, the chip manufacturer has made considerable progress in the data center sphere, capturing market share from Intel and disrupting its long-standing supremacy in the server chip segment. However, AMD still has room for growth in areas like gaming and CPUs, where it trails behind Intel.
Future Outlook
The management of AMD aims for a 20% increase in fourth-quarter revenue, targeting around $7.5 billion, which is slightly lower than market predictions, along with an expected adjusted gross margin of about 54%. The company has also revised its full-year guidance for Data Center GPU revenues from $4.5 billion to $5 billion, following the completion of important customer milestones. Recently, AMD partnered with Dell to launch PCs featuring its Ryzen AI PRO processors.
Adjusted earnings for Q3 2024 increased to $0.92 per share, up from $0.70 per share in the same quarter last year, meeting analysts’ expectations. On a reported basis, net income rose to $771 million or $0.47 per share in Q3, compared to $299 million or $0.18 per share during Q3 2023.
Robust Revenues
The strong earnings performance was bolstered by an 18% rise in revenues, amounting to $6.82 billion in the September quarter, up from $5.8 billion in the same quarter last year, amidst a recovery in chip demand. This figure also surpassed market projections. Notably, Data Center revenue, constituting about half of total revenue, more than doubled, while the Client segment, the second largest, experienced a 29% growth in Q3.
In response to the Q3 outcomes, AMD’s CEO Lisa Su stated, “As we look ahead, we are exceptionally well-positioned for ongoing growth in market share, driven by the strength of our comprehensive EPYC portfolio and the momentum we’ve established with cloud and enterprise clients. Additionally, we took a significant step this quarter to advance the x86 architecture by forming an ecosystem advisory group with Intel, various industry leaders, and key cloud PC and enterprise figures to promote innovation through consistency and compatibility within the x86 instruction set and architectural interfaces…”
On Thursday morning, AMD shares traded lower, continuing the trend observed in recent trading sessions. The stock is hovering just above $120, which is below its 52-week average.
