AMD's Stock Is Trading Near Its 52-Week Low. Is Now the Time to Buy?

This year, the tech sector and the excitement surrounding artificial intelligence (AI) have dominated headlines. However, amidst this positive noise, Advanced Micro Devices (AMD) has faced significant challenges. As of Monday, AMD's shares had dropped by 15% year to date, bringing the stock close to its 52-week low, even though it holds considerable long-term potential.

With the stock struggling, many are left wondering: Is now the right time to invest in AMD stock?

Why hasn't AMD stock been a better performer this year?

In contrast to AMD’s performance, its competitor Nvidia has experienced remarkable success, becoming one of the top three most valuable companies globally, boasting a market capitalization of $3.2 trillion, which dwarfs AMD's $200 billion market cap by over 16 times.

AMD's stock currently trades at a staggering 110 times its trailing earnings. More than just the high valuation, AMD's revenue growth has been modest compared to emerging tech giants like Nvidia.

Throughout the year, while other companies have soared in response to AI-driven demand, AMD's performance has been relatively lackluster. To regain the attention of growth investors, AMD will need to present a substantial catalyst for change.

Looking ahead, AMD has stated it is positioned for record revenue in 2024, claiming to see "significant growth" across multiple segments of its business. Nevertheless, this announcement may not resonate strongly with investors after observing other tech firms' rapid growth this year.

On a hopeful note, AMD projects that its growth rate will pick up during the fourth quarter of the year, estimating sales to reach around $7.5 billion—representing a 22% increase year-over-year.

AMD's new chip could determine how the stock performs next year

AMD is actively targeting the AI chip market, and there is potential for it to capture some market share from Nvidia. Companies might be on the lookout for more affordable chip alternatives or aim to diversify their supply chains, reducing reliance on a single supplier.

According to AMD, its recently launched MI325X chip is touted to be 30% faster than Nvidia's H200. If true, this performance could challenge Nvidia's dominance in the GPU sector, potentially fueling AMD's growth and providing the stock with a much-needed boost as we approach 2025.

Is AMD stock worth buying right now?

While AMD has not proven to be a profitable investment in 2024 thus far, it may still be an underappreciated stock worth holding in the upcoming year. With new chips being introduced and AMD expecting accelerated growth, it appears the foundation is being set for improved stock performance in 2025.

Despite its currently high valuations when assessed on trailing metrics, AMD is trading at a forward price-to-earnings ratio of 25 based on analysts' consensus forecasts. This makes it a more attractive option for long-term investors. Given AMD's potential in the AI chip business, now might be one of the best times to buy the stock, especially as it seems to be flying under the radar—something that could ultimately prove to be a significant oversight by investors.

AMD, Stock, AI