Advanced Micro Devices (NASDAQ:AMD) remains a top chip stock investors continue to focus on, as the race for high-performance computing market share heats up. Of course, Nvidia (NASDAQ:NVDA) remains the key player in this space. But AMD’s focus on cost-effective alternatives could allow for greater market share gains in the AI space. And all eyes are turning to this company following AMD’s planned $665 million acquisition of Silo AI, which enhances its AI capabilities and broadening its competitive edge.
However, AMD stock has also seen a boost following the company’s Q2 earnings report. Let’s dive into what the company reported and why the stock popped following the release before returning to earth in recent sessions.
Q2 Earnings Came In Strong
On Tuesday, AMD reported its second-quarter earnings, which impressed many investors. The stock popped 8% after the company reported it sold more than $1 billion of its MI300 chips during the past quarter, with data center revenue growing 115% from a year ago.
These key factors allowed the company to produce 69 cents in adjusted earnings per share, beating estimates by 1 cent. Additionally, revenue was materially higher across AMD’s entire business, with $5.84 billion brought in last quarter versus $5.72 billion expected.
While AMD continued to lag Nvidia and other chip makers this year on a total return basis, the hope is that continued market share gains may be seen over time, particularly with the company’s MI300 chips. We’ll have to see how future quarters come in, but these numbers paint a rather rosy picture.
Could the Stock See a Post-Q2 Rally?
Investor interest in AMD stock remains high, partly due to the stock’s recent relative underperformance. AMD continues to gain market share against other rivals such as Intel (NASDAQ:INTC), so as long as this trend continues, there are plenty of reasons for investors to continue to hold some exposure to AMD in their portfolios (likely in addition to Nvidia).
I believe AMD and Nvidia are the top two players in the chip space, and I don’t see this dynamic changing anytime soon. For example, one of the key reasons for AMD’s outperformance relative to Intel is that company’s slow adoption in advanced process nodes. AMD recently released its fourth-generation EPYC CPUs and has strong demand in its AI GPUs. This should continue to fuel growth for the company, highlighting the opportunity to gain more market share in the competitive AI chip market.
Silo Acquisiton
AMD’s stock surged after announcing a $665 million deal to acquire Silo AI, boosting its competitive stance against Nvidia. Silo AI’s CEO expressed enthusiasm about the partnership, which is expected to enhance AMD’s market position and operational synergies, supporting a “buy” rating.
The deal, set to close in the second half, will integrate Silo AI’s innovations with AMD’s hardware. Peter Sarlin will lead the Silo AI team within AMD’s AI Group, enhancing AMD’s AI capabilities and influence in the semiconductor market.
Buy and Hold AMD Stock
Surging over 65% since 2021 and now valued around $130, AMD is expected to grow more and benefit from the AI tidal wave. The stock is expected to reach $163, an 25% increase. Moreover, its high valuation is justified by its strong CPU sales and AI chip innovations. Investors are fully focused on AMD’s potential and performance, making it a tough competitor for its rivals.
On the date of publication, Chris MacDonald did not hold (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.
On the date of publication, the responsible editor held a LONG position in NVDA.
