Advanced Micro Devices (NASDAQ:AMD) is living in the shadow of archrival Nvidia (NASDAQ:NVDA). But it would be a mistake to count out this microchip designer. AMD stock has fallen 7% over the past month as shares of Nvidia have soared.
Year-to-date, AMD stock is up 12% versus a 182% gain for NVDA stock. Advanced Micro Devices is also trailing the Nasdaq exchange on which it trades, whose gain this year stands at 20%.
While frustrating, the underperformance is not likely to last and there are plenty of reasons to remain bullish on AMD stock.
‘Strong Buy’ Rating for AMD Stock
Professional analysts remain enthusiastic about AMD and its prospects. Currently, 36 Wall Street analysts rate AMD stock a “strong buy” with a median price target that is nearly 25% higher than where the shares currently trade.
There isn’t a single “sell” rating on AMD stock. The analyst community continues to see Advanced Micro Devices as a leading challenger to Nvidia in the market for microchips and processors that can power AI models and applications.
At the start of June, AMD announced its newest AI chips at a conference in Taiwan, acknowledging that competition with market leader Nvidia is heating up.
AMD CEO Lisa Su unveiled the Ryzen AI 300 series for next-generation artificial intelligence laptop computers. The new chips are expected to compete directly with Intel’s (NASDAQ:INTC) upcoming Lunar Lake and Qualcomm’s (NASDAQ:QCOM) Snapdragon X chips.
New Chips
The newest microchips from AMD will run AI-enabled laptop computers, such as the upcoming Microsoft (NASDAQ:MSFT) Surface laptop that’s equipped with that company’s AI chatbot called “Copilot.”
CEO Su also unveiled the new Ryzen 9000 series of microchips for desktop computers. Both lines of new chips are expected to ship in July of this year.
The newest microchips from AMD arrive less than two months after the company’s announcement in April of new Ryzen Pro 8040 chips for laptop computers and the Ryzen Pro 8000 for desktops.
Microchip and semiconductor designers are launching faster and more powerful processors as competition in the global AI race intensifies. Analysts have praised AMD’s technology and efforts to keep pace with Nvidia.
AMD has also sketched out its data center chip road map with its “Instinct MI325X” accelerator chip leading its push into that area of computing. The Instinct MI350 series of chips is to be released in 2026.
Decent Earnings
Advanced Micro Devices’ earnings haven’t been the blockbuster results reported by Nvidia. But they have consistently topped Wall Street forecasts.
The company continues to raise its forecast for AI microchip sales, recently boosting its sales outlook for this year to $4 billion, which is double what the company predicted last December.
For this year’s first quarter, AMD reported EPS of 62 cents compared to 61 cents expected on Wall Street.
Revenue in Q1 totaled $5.47 billion versus $5.46 billion, that was forecast among analysts. AMD’s data center unit revenue grew by 80% YoY to $2.3 billion due to strong sales of its MI300 series AI chips.
The company sold more than $1 billion of the AI chips since they launched in late 2023. AMD’s core business making processors for personal computers (PCs) saw sales rise 85% from a year earlier.
Buy AMD Stock
Advanced Micro Devices is one blowout quarter away from its share price skyrocketing. That quarter is likely to happen as sales of the company’s new AI microchips takeoff.
Investors need to remember that it’s still early days for AMD’s AI-focused chips and processors. But the company is well-positioned to gain ground and challenge Nvidia in the red hot space.
Among chip stocks, few are as competitive as Advanced Micro Devices. For this reason, AMD stock is a buy.
On the date of publication, Joel Baglole held long positions in NVDA and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
