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

Advanced Micro Devices (NASDAQ: AMD) has faced challenges with GPU market share, particularly against NVIDIA (NASDAQ: NVDA), during the early stages of the AI expansion. However, AMD is poised to regain this share and potentially capture even more over time.

A key factor for this potential recovery is NVIDIA's advantage as the first mover in the market, alongside its well-established ecosystem. Although AMD was initially caught off guard by the rapid shift towards AI, it has been making significant strides to enhance its AI offerings, developing a comprehensive and user-friendly ecosystem for developers. This effort is starting to gain traction as we look towards 2025.

Performance, Efficiency, and Cost Lead to AMD Share Gains

Advanced Micro Devices Today

AMD stock is currently priced at $103.62, down by -0.97 (-0.92%) as of 10:08 AM Eastern time. The 52-week trading range for AMD is between $94.73 and $193.50, with a P/E ratio of 104.67 and a price target of $155.14.

The outlook for AMD to reclaim market share is supported by its superior performance and operational cost advantages. The company's Instinct MI325X boasts outstanding HBM3E capacity and operational efficiency, which enhances inference, boosts performance, and lowers the overall cost of AI ownership.

Industry insiders recognize the value that AMD’s GPUs and AI frameworks bring. Major technology firms like Dell, Lenovo, and Hewlett Packard Enterprises incorporate AMD products into their cutting-edge AI supercomputers and servers. Additionally, they are integrating AMD’s AI solutions into PCs, mobile devices, and IoT systems.

On the data center front, AMD is also making inroads into the CPU and PC markets. According to Q4 data, AMD achieved a record-high unit share of 25.1% and a revenue share of 35.5%, surpassing Intel for the first time. The EPYC CPUs are leading the performance category, and projections suggest its business could grow from $5 billion in 2025 to potentially tens of billions in the coming years, contributing significantly to its revenue growth.

Moreover, AMD’s Ryzen product line enhances device performance and user experience, lowering latency and improving audio/video quality. The Ryzen line has increased its market share each quarter throughout 2024, gaining nearly 500 basis points by the end of the year and is expected to continue its upward trajectory in 2025.

Advanced Micro Devices Provides a Value Opportunity in AI

Given the recent price correction in 2024/2025, there exists an attractive value opportunity within AMD stock. Currently trading at just 22 times its earnings, the stock is seen as fairly valued in relation to the S&P 500, without an AI premium included, despite the company’s robust growth prospects.

Advanced Micro Devices Stock Forecast Today

The 12-month stock price forecast for AMD is $155.14, indicating a potential upside of 49.48%. Based on 32 analyst ratings, the consensus rating is a Moderate Buy.

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

AMD is forecast to see high double-digit earnings growth through 2030, significantly outpacing the expected growth of the S&P 500, with current estimates likely being conservative. The stock is trading below 9 times its projected 2030 earnings, suggesting a potential increase of at least 100% over the next five years, with possibilities for gains of 200% to 300% as it aligns with other prominent tech giants.

Analyst sentiment indicates that AMD is undervalued at present. Although price targets were adjusted downward in 2024, the general outlook remains positive. Despite the reductions, analysts project nearly a 50% upside from mid-March price points, and future projections suggest that even the lowest targets are above current trading levels, indicating at least a 10% increase within the year.

Advanced Micro Devices Hit Bottom in March

AMD’s stock price recently experienced a decline that reached a crucial long-term support level in early March, where it began to show signs of recovery. This level coincides with lows established in fall 2023 prior to the AI boom, indicating that a market bottom may have been reached.

AMD stock might move in a sideways pattern until late April, coinciding with the release of Q1 results. Should these results not present any negative surprises, there is potential for stock advancement. The critical resistance point currently stands at the 30-day EMA near $106; if the stock can surpass this, it may rise to the $115 to $120 range before hitting its peak.

Should You Invest $1,000 in Advanced Micro Devices Right Now?

It is important to note that while Advanced Micro Devices has a Moderate Buy rating among analysts, some top-rated analysts have identified other stocks as more appealing investment options at this time.

In summary, while AMD shows promising signs for recovery and value in the AI space, potential investors may want to explore all options in the current market before making decisions.

AMD, AI, market