Advanced Micro Devices (NASDAQ:AMD) stands to benefit from AI industry growth over the next three years. While AMD’s forward price-earnings multiple is actually higher on a relative basis than Nvidia’s (NASDAQ:NVDA) (44-times earnings compared to 30-times), this is a company many believe could have greater upside over time. Much of that has to do with the company’s relative market share compared to the market leader in AI chips. This valuation is central to this AMD stock forecast.
Advanced Micro Devices saw its share price skyrocket, more than doubling last year in large part due to AI trends. But unlike Nvidia, AMD’s rally relies more on forecasts than current performance. Shedding light on AMD’s Q4 earnings can provide some insight into its evolving chip business.
Let’s dive into why AMD can be a strong competitor in this space long-term.
Still Running the AI Race
AMD offers AI-powered PCs to compete with Nvidia and Intel. AMD’s President Victor Peng noted strong market growth for AI PCs and expects to see more demand materialize in the second half of the year. These PCs with specialized processors excel at AI tasks, such as generative AI. Analysts project that 60% of computers shipped in 2027 will be AI-capable, resulting in surging demand for personal computers overall.
According to the International Data Corporation, the initial surge in demand for AI chips may come via the PC market, with foreseeable growth expected based on use cases and cost reductions. IDC sees AI-powered PC innovations on the horizon. AMD’s mighty Ryzen 8000G Series processors for gaming and content creation could be a big winner in this environment and are the key catalyst many AMD investors are watching closely. This is important for this AMD stock forecast.
More Chip Releases
AMD’s upcoming Strix Point mobile processor will embrace the next-gen Zen 5 architecture, as CEO Dr. Lisa Su revealed in the company’s Q4 earnings call. AMD reported a hefty 3,076% increase in net income to $667 million and a 10% boost in revenue to $6.2 billion. These results follow the company’s recent launch of its Ryzen 8000 series chip.
AMD released the mobile Ryzen 8000 series in December, which is set to ship in February. Su highlighted the company’s AI CPU roadmap, shooting for triple the AI performance of the Ryzen 7040 series. Strix combines the Zen 5 core, enhanced RDNA graphics, and an updated Ryzen AI engine for faster computing, efficient energy, and AI capabilities. The first Srix laptops, expected to debut later this year, are set to capture strong customer interest.
Due in large part to the company’s new chip launches, AMD expects to see strong revenue growth in 2024’s second half. The company emphasizes leadership in AI-powered PCs and Zen 5 CPU launches, as Strix Point competes with Intel’s (NASDAQ:INTC) Meteor Lake and Lunar Lake.
AMD Is Strong
Running alongside Nvidia and Intel in the GPU race, AMD is fighting hard to win market share in AI and high-performance computing. Nvidia is currently leaning the pack, launching new AI GPUs for generative AI applications on PCs and laptops. However, many investors do believe (and rightly so, in my view) that there’s more than enough room for multiple players in this market.
AMD’s competitiveness based on both price and potential future performance is worth noting. Of course, AMD’s value stems more from its long-term potential than its backward-looking results. Accordingly, for investors seeking a more stable bet, Nvidia may remain the top option for many.
But for those looking to skate where the puck is headed, I think AMD is a much better bet than Intel right now, particularly when one considers where the PC market is headed. The semiconductor sector will be an intriguing one to follow in the coming years, and I think AMD stock deserves a shot at a portfolio position for investors looking for diversified exposure to chips right now. This is the conclusion of my AMD stock forecast.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
