Advanced Micro Devices (AMD) has faced challenges over the past year, with its shares dipping around 40% despite record revenues in Q4 2024. Factors like concerns over slowing capital spending by hyperscalers, export restrictions to China, and potential trade wars have pressured the company’s stock. AMD’s muted guidance for Q1 2025 has also dampened investor sentiment.
However, AMD is focusing on its artificial intelligence (AI) ambitions to strengthen its position in the growing data center market. The company’s next-generation AI accelerator, the MI350, is set to launch in mid-2025, with CEO Lisa Su emphasizing strong customer demand and accelerated development progress. Some investors see potential opportunities in the current stock pullback.
Oakoff Investments views the recent price dip as a favorable entry point for those optimistic about AMD’s long-term prospects. The investor highlights AMD’s advancements in new generations of CPUs and GPUs, the expected performance leap with the MI350 series in AI applications, and the company’s consistent gain in market share within the server CPU market. Oakoff also notes AMD’s increasing revenue focus on the lucrative Data Center segment, with Data Center EBIT growing 175% year-over-year in 2024 and Q4 2024 revenues expanding 69% year-over-year.
The investor concludes, “I believe AMD is quite well positioned in today’s still bullish environment where we see strong demand from AI infrastructure builders,” rating AMD a Strong Buy. Wall Street analysts also hold a positive outlook on AMD, with a consensus Moderate Buy rating and a 12-month average price target of $147.81, indicating a potential upside of around 39% over the next year. Shares of AMD jumped 7.8% in the afternoon session after stocks rebounded following a report from The Wall Street Journal.
amd shares rally amid new opportunities
The report suggested that the Trump administration’s reciprocal tariffs would be more narrowly targeted, potentially lessening the economic impact on inflation and growth. AMD’s shares closed the day at $113.85, up 7% from the previous close.
The market’s reaction to the news suggests that it considers the development significant but not fundamentally altering its perception of AMD’s business. The company’s shares have been volatile, experiencing 15 moves greater than 5% over the last year. As of now, AMD is down 5.7% since the beginning of the year and trading 38.1% below its 52-week high of $183.96 from July 2024.
While AMD remains a key player in the AI market, it faces challenges in capturing substantial market share from Nvidia in the GPU market. However, the company is experiencing growth due to the increasing demand for AI infrastructure and is gaining traction in inference tasks. AMD has been particularly successful in its CPU business, gaining market share in the data center space and reporting over 50% share among hyperscaler clients.
The company’s data center revenue soared 69% year-over-year to $3.9 billion last quarter, and for the entire year, it surged 94% to $12.6 billion. With its current valuation of 22.5 times analyst estimates for 2025 and projected revenue growth, AMD stock appears to be a buy at current levels. However, investors should not expect the company to become the next Nvidia-type stock market winner.
Instead, they should focus on AMD’s strong growth potential in data centers as AI infrastructure spending boosts the overall chip market.