Advanced Micro Devices (NASDAQ:AMD) stock is coming on strong in the global race to develop microchips and semiconductors that power AI technologies and should continue outperforming.
Strong earnings, new products, and growing market share should power AMD stock higher in the coming months and years. While the company and its shares continue to be overshadowed by archrival and industry leader Nvidia (NASDAQ:NVDA) that might not last much longer. Investors who take a position in AMD stock now are likely to be richly rewarded going forward.
Strong Outperformance
AMD continues to produce strong financial results that are helping to push it share price to new heights. At the end of October, the company reported third-quarter numbers that bested Wall Street forecasts. AMD announced earnings per share (EPS) of 70 cents versus 68 cents that was expected by analysts who track the company’s progress. Revenue in the quarter totaled $5.8 billion compared to $5.7 billion that was estimated. Revenue rose 4% from $5.6 billion a year earlier.
While the Q3 beat wasn’t a blockbuster, it was AMD’s forward guidance that got all the attention and sent the stock upwards. The company forecast $2 billion in 2024 sales for its high-end graphics processing units (GPUs) that are used to train and run generative AI applications. However, it isn’t all about AI at the company. AMD also reported that revenue in its client group, which includes microchip sales for personal computers (PCs) rose 42% year-over-year to $1.5 billion during Q3.
Taking Market Share
The strong results and bullish outlook continue to impress analysts and investors, who are bidding up the company’s share price. AMD stock is up 90% this year and has gained 525% over the past five years, making it a top performer among tech concerns. Despite the strong multi-year run, analysts continue to see more runway ahead. The median price target on AMD stock right now is 7% higher than current levels. Also, AMD stock is currently trading 22% below its all-time high reached in November 2021.
Another telling statistics that analysts point to is the fact that AMD is continuing to take market share from its competitors in the fiercely competitive chip industry. While Nvidia remains the leader in making AI chips, with 70% market share, AMD has been taking share from Intel (NASDAQ:INTC). In the past two years, AMD’s share of the Data Center segment that includes its GPUs has doubled to nearly $1.5 billion. Intel’s share of that market has decreased by 40%.
A Game Changing Chip
Much of the bullishness related to AMD has to do with its brand new microchip it’s rolling out called the MI300X. The chip is just now being shipped to customers worldwide and demand is strong. The new chip targets Nvidia by powering large language models for generative AI applications.
The MI300X outperforms other chips on the market, including Nvidia’s H100 chip, with its 192 gigabits of memory for accommodating larger AI models. The MI300X microchip is projected to drive a substantial portion of the $2 billion AI chip sales in 2024.
AMD has also announced said that it is developing its own software for its AI chips called “ROCm.” Company executives have said that they see AI as their key growth driver moving forward.
Buy AMD Stock
Advanced Micro Devices remains a best-in-class chip stock for investors to own. The company is flourishing in PC chip business and making headway in AI chip market. The year ahead should be a big one for the company. With the company’s stock continuing to deliver big gains for shareholders and more growth ahead, investors should hesitate with this security. AMD stock is a buy.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
