Advanced Micro Devices Eyes AI Market Growth—Is AMD a Buy?

Advanced Micro Devices (AMD) is on a path to regain its share in the GPU market, which it initially lost to NVIDIA during the AI boom. This opportunity comes as AMD develops its capabilities in the field of artificial intelligence (AI).

The key factor behind this potential growth is the first-mover advantage held by NVIDIA and its well-established ecosystem. While AMD was initially unprepared for the AI trend, the company has since made significant efforts to create an AI stack that is appealing to developers. As a result, AMD is starting to gain traction and is expected to continue doing so into 2025.

Performance, Efficiency, and Cost Lead to AMD Share Gains

Current Status of Advanced Micro Devices

As of the latest update, AMD's stock is priced at $103.62, reflecting a slight decrease of -0.97 or -0.92% as of 10:08 AM Eastern. This current price indicates a fair market value according to sources like Polygon.io.

52-Week Range

$94.73 to $193.50

P/E Ratio

104.67

Price Target

$155.14

The potential for AMD to reclaim its market share is strongly linked to its product performance and operating costs. The AMD Instinct MI325X model stands out due to its leading capacity in HBM3E memory and ability to enhance operational efficiency. This product not only boosts AI inference capabilities but also optimizes overall performance while cutting down the total cost of AI ownership.

Industry experts acknowledge the value of AMD GPUs and AI infrastructure. Major tech companies, including Dell, Lenovo, and Hewlett Packard Enterprises, have taken notice of AMD's offerings, incorporating them into their advanced AI supercomputers and servers. Furthermore, efforts are underway to integrate AMD’s edge AI solutions into PCs, mobile devices, and IoT gadgets.

At the same time, AMD has secured its standing in the data center CPU and PC markets. Data from Q4 indicates that AMD achieved a record-high unit share of 25.1% and 35.5% in revenue, marking a significant achievement as it outpaced Intel for the first time. The EPYC CPU line has shown remarkable performance and is anticipated to grow from a $5 billion segment in 2025 to billions more over the following years, contributing majorly to top-line revenue.

On the edge computing front, AMD's Ryzen series boosts device efficiency, improves user productivity, reduces latency, and enhances the overall quality of audio and video. AMD has expanded its market share on a quarterly basis throughout 2024, and projections suggest it will continue to gain momentum into 2025.

Advanced Micro Devices: A Value Opportunity in AI

The price correction in AMD stock during 2024 and 2025 has created an attractive value opportunity for investors interested in AI stocks. Priced at only 22 times its earnings, AMD appears fairly valued relative to the S&P 500, with no premium attributed to its AI potential, yet it exhibits a stronger growth trajectory.

Forecast for Advanced Micro Devices Stock

Over the next 12 months, analysts forecast AMD’s stock price to reach $155.14, implying an upside potential of 49.48%. Current recommendations classify AMD as a Moderate Buy, based on 32 analyst evaluations.

Current Price	$103.78
High Forecast	$250.00
Average Forecast	$155.14
Low Forecast	$110.00

Moreover, projections suggest that AMD will experience high double-digit growth in earnings through 2030, which would considerably exceed the expected growth rate of the S&P 500. Given this outlook, the estimates for AMD's earnings could very likely be conservative.

AMD stock currently trades at a valuation below 9 times its EPS forecast for 2030, indicating that it may retain an upside potential of at least 100% over the next five years. There is also potential for a 200% to 300% increase to align with other top-tier technology firms.

Investor sentiment surrounding AMD suggests that the stock is significantly undervalued. Analysts have adjusted their price targets for 2024 and into early Q1 of 2025, but overall remain optimistic. Recent adjustments led to a decrease in consensus targets by about 20% over the past year.

The consensus continues to imply a near 50% upside from the price levels observed in mid-March. The market sell-off has created conditions where even the lowest targets exceed current pricing trends, hinting at a minimum 10% upside potential before the year concludes.

Recent Price Recovery for Advanced Micro Devices

The decline in AMD’s stock reached a significant long-term support level in early March, at which point it began to recover. This crucial level mirrors the lows from fall 2023, indicating a potential bottom has been established in the market.

While AMD stock may trade sideways until the release of Q1 results in late April, it stands to gain if no adverse news surfaces. The immediate resistance is the 30-day exponential moving average near $106; a breakthrough above this could propel the stock into the $115 to $120 range before facing upper resistance.

Should You Invest in Advanced Micro Devices Right Now?

Before making any investment decisions regarding AMD, it’s a good idea to conduct thorough research.

Experts suggest keeping an eye on various recommendations from top analysts who monitor stock performance. Presently, AMD holds a Moderate Buy rating among analysts; however, some of the most esteemed analysts have identified other stocks they believe offer better buy opportunities.

AMD, AI, Investment