AMD’s Stock Soars Amid AI Advancements
Shares of Advanced Micro Devices (NASDAQ: AMD) have experienced an impressive surge exceeding 320% over the past year, as investors rally around AMD’s narrative of growth in delivering processors for agentic artificial intelligence (AI).
While Nvidia has also enjoyed noteworthy gains, with its stock escalating by 82% in the same timeframe, these figures pale in comparison to the broader market, particularly the S&P 500, which has advanced by 32%.
Despite AMD’s meteoric rise, a noticeable disparity in stock performance has led some investors to contemplate a pivot from Nvidia to AMD. For those seeking to diversify their AI hardware portfolios, acquiring AMD shares might be an astute decision; however, abandoning Nvidia entirely may not be prudent.
AMD’s Ascendancy Fueled by AI Developments
With several cycles of AI enthusiasm already observed, AMD finds itself buoyed by two pivotal components propelling its central processing units (CPUs) sales: inference (training AI) and agentic AI.
CEO Lisa Su articulated this potential during the first-quarter earnings call, stating: As inferencing and agentic AI deployment scale [up], they are fundamentally increasing computing requirements, driving both larger-scale accelerator deployments and significantly greater CPU compute.
AMD is uniquely poised to lead in this next phase of AI with superior products across high-performance service CPUs and AI accelerators.
While the terminology may seem technical, the essence lies in AMD’s conviction that it occupies a prime position to furnish unparalleled hardware solutions for inference and AI functionalities—evidenced by a robust demand from customers.
Total revenue for the first quarter soared by 38% to $10.3 billion, accompanied by a staggering 57% increase in data center sales, totaling $5.8 billion.
This robust growth propelled management to reassess its server CPU total addressable market, now anticipated to reach $120 billion by 2030—essentially double previous projections. Furthermore, the company has elevated its second-quarter revenue forecast to $11.2 billion, reflecting a 46% uptick from prior estimates.
A major advantage for AMD resides in its dual offerings of both CPUs and graphics processing units (GPUs), with the demand mix for AI computing experiencing a paradigm shift.
Historically, the ratio stood at one CPU to four (or even eight) GPUs for agentic AI and inference, yet this has shifted to approximately 1:1.
AMD asserts that agentic AI engenders supplementary CPU tasks that its processors are adept at managing.
This presents a unique opportunity for the company to offer clients a comprehensive AI solution comprising both CPUs and GPUs for forthcoming AI requirements.
Should Investors Transition from Nvidia to AMD?
Nvidia to AMD. Nevertheless, maintaining a portfolio that includes both entities may be the more prudent approach at this time.
Consider that the other part of the 1-to-1 ratio of AI necessities comprises GPUs, a domain where Nvidia retains a formidable lead, capturing approximately 86% of data center GPU revenue.
This dominance is unlikely to wane anytime soon, as the appetite for GPUs within AI data centers persists.
Nvidia’s shares also present a more attractive valuation, with a price-to-earnings ratio (P/E) of 40, contrasted with the tech sector’s average of around 43, while AMD’s ratio stands at 136.
AI stocks are likely a sound long-term strategy. As technological demands for CPUs and GPUs amplify, AMD and Nvidia remain exceptionally well-placed to capitalize on this burgeoning demand.
Is It Advisable to Invest in Advanced Micro Devices Now?
Before considering an investment in Advanced Micro Devices, it is prudent to take into account the following:
The Motley Fool Stock Advisor analyst team has recently identified what they deem to be the 10 best stocks worth acquiring now, and Advanced Micro Devices is notably absent from this selection. The ten stocks featured have the potential to yield substantial returns in the years ahead.
Consider the case of Netflix, which made this list on December 17, 2004. If one had invested $1,000 upon recommendation, they would have amassed $471,827.
Furthermore, when Nvidia appeared on this list on April 15, 2005, a $1,000 investment would have burgeoned to $1,319,291!
It’s noteworthy that Stock Advisor’s overall average return is 986%—a remarkable performance compared to the S&P 500’s 207% returns.
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