Advanced Micro Devices (NASDAQ:AMD) has been riding in Nvidia’s (NASDAQ:NVDA) slipstream for months. Advanced Micro Devices stock has increased by 75% in the past six months. If you invested when Lisa Su became CEO in 2014, you’ve made over 6,300%.
Generative AI won’t just happen on servers, it will also take place on clients. PCs and phones will need small, but powerful central processing units, as well as graphics processing units, to handle the load.
The AMD AI PC
This race has barely begun. The products at your local BestBuy (NYSE:BBY) today aren’t built around these demands, because the software hasn’t been written. But it will be. The demand will be there.
When it is there AI ceases to be an AMD vs. Nvidia battle. It becomes an AMD vs. Intel (NASDAQ:INTC) battle, an AMD vs. Samsung (OTCMKTS:SSNLF) battle.
It becomes an AMD vs. ARM Holdings (NASDAQ:ARM) battle, an AMD vs. Apple (NASDAQ:AAPL) battle. Even an AMD vs. Microsoft (NASDAQ:MSFT) battle.
These companies may have great CPU designs. But what about GPUs? Samsung has already seen the future, and linked with AMD’s GPU design for its next-generation Exynos chip .
The Future Client
This illustrates something I’ve been writing for years. Hardware is software.
The value of a chip is in its software, far more than in the fabrication. That’s why AMD went “fab-less” before Su became CEO.
Software can be licensed. It can be integrated into a competitor’s hardware. It’s part of the “coopitition,” cooperation built within competition, that has been part of technology for decades.
AMD can thus combine the capabilities of its Radeon GPUs with those of its Ryzen CPUs. It can integrate these capabilities quickly, with the chips of competitors. They can be produced on the same silicon, speeding them to market.
AMD already has nearly one-third of the PC market, and it’s not losing that share with the latest Zen5 Ryzen chip. As negotiations over chips for tomorrow’s AI PCs begin, Su is in a very strong position.
How This Boosts Numbers
AMD has more than doubled its sales this decade, but profits have been iffy. Net income was down by more than two-thirds in 2023 from their 2021 peak.
Licensing for clients could change that. Analysts are now expecting AMD to have net income of over $5 per share in fiscal 2025, although one sage has it over $8.30.
That’s a forward price to earnings ratio under 22, which isn’t half bad. Then consider that the AI PC boom will likely last for years after the current AI Infrastructure boom slows down.
The Bottom Line on Advanced Micro Devices Stock
Success is never guaranteed.
AMD has had many opportunities over the years to break free of its second-place status, first against Intel and now against Nvidia.
Failure to gain ground is certainly an option.
But silver medals can also be profitable. Even if AMD only partly fulfills the vision I’ve laid out, it’s going to grow, and it is going to be profitable.
You won’t find any analysts at Tipranks telling you to sell. The traders at Stocktwits can still find reasons to be bullish.
I have been following AMD closely ever since Su rose to its CEO chair a decade ago. At the time the stock traded at around $3 per share.
Last year she earned twice what Intel CEO Pat Gelsinger made. Given the track record, she earned it. She’s good for more.
As of this writing, Dana Blankenhorn had LONG positions in NVDA, MSFT, INTC, and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
