Is AMD Stock an All-Time Buy?

Advanced Micro Devices (NASDAQ:AMD) is a high-growth AI stock that has actually seen its share prices fall amid the tech stock boom of 2024. While stocks like Microsoft and NVIDIA soared, AMD has fallen 15.2 percent this year and is now trading near the bottom of its 52-week range at about $125.

Is AMD an all-time buy while its share price is depressed, or is the market valuing the stock accurately at a lower price range?

AMD Revenues Have Been Stunning

Like most companies involved in the AI hardware market, AMD has been going great guns since the AI boom began. In 2020, the company generated just $9.8 billion in revenue. For the 12 months ending in Q3, revenue totaled $23.3 billion.

AMD is still growing at a brisk pace, as shown in its Q3 earnings report. For the quarter, revenues climbed by 18% to $6.8 billion and net income rose 158% to $771 million. Much of this came from increased data center sales, which soared by 122% on a year-over-year basis and 25 percent compared to the previous quarter.

For Q4, the company expects to see revenues climb to about $7.5 billion. This would represent a 22% gain over the top line figure in the year-ago quarter. While management hasn’t issued guidance for net income or EPS, it does expect gross margin to improve from its current level of 50% to 54%.

Where Are AMD’s Growth Opportunities?

Up to now, AMD has largely taken advantage of the booming AI chip market by providing more cost-effective but less powerful chips than NVIDIA, its main competitor. AMD’s chips are about 80 percent as powerful as NVIDIA’s, making them good choices for applications that don’t require the absolute cutting-edge computing that NVIDIA provides.

Going into 2025, though, AMD is focusing much more closely on the kind of high-end GPUs that NVIDIA has seen so much success with. In November, the company formally launched its Instinct MI325X chip, a direct competitor to NVIDIA’s Blackwell GPU. With this and future Instinct models, the company hopes to begin seriously taking fuller advantage of demand for AI data center chips.

Recently, NVIDIA has also experienced some setbacks that could open it up to competition from AMD and other AI chip companies. The Blackwell GPUs that AMD hopes to run its latest chips against have reportedly been overheating on server racks, potentially pushing back delivery times.

A final notable point regarding AMD’s growth prospects is the fact that the company has already secured business relationships with several major tech companies. Meta and Microsoft have purchased earlier GPUs from AMD in an attempt to diversify away from their reliance on NVIDIA as an exclusive hardware provider. As AMD rolls out progressively better GPUs, it’s likely that these large customers will continue to invest in its chips.

Between NVIDIA’s recent stumble, the desire of major tech companies to reduce their dependence NVIDIA and AMD’s decision to compete seriously in leading AI chips, the growth opportunities over the coming years could be substantial. In the next few years, analysts foresee AMD’s earnings per share compounding at around 40 percent annually.

Is AMD Fairly Priced?

Even though AMD has fallen off, the stock is still by no means cheap. AMD trades at about 36 times forward earnings and 28.4 times cash flow, not to mention a price-to-sales ratio of 8.0. All of these metrics would be very worrisome if it wasn’t for AMD’s growth potential. The stock’s price-to-earnings-growth ratio of 1.3 suggests that it’s priced near a fair level relative to near-term growth expectations.

Despite the stock’s somewhat high valuation, analysts expect it to go much higher over the coming year. The lowest price target for AMD shares is currently $146, while the median is $183. Given AMD’s current price, these forecasts suggest an upside of anywhere from about 17 percent to over 46 percent.

So, Is AMD Stock an All-Time Buy?

Based on AMD’s share price relative to its 52-week low and its plans to compete with NVIDIA at higher price points alongside substantial valuation upside, it appears AMD is an all-time buy now.

AMD’s growth prospects look fairly good, suggesting that the company will likely be able to take fuller advantage of the AI boom than it has up to now. With more advanced chips that can take on NVIDIA’s GPUs, AMD could finally begin staking its own claim at the upper end of the AI chip market and giving NVIDIA meaningful competition.

Right now, AMD is also trading at what could be an attractive price for long-term investors. Though the stock’s multiples to its current sales and earnings are quite high, ongoing growth could justify them. The fact that AMD has been selling off throughout 2024 despite substantially improving its performance suggests that it could be due for an upward correction.

Putting it all together, AMD looks like it could be a decent buy for investors looking for discounted AI stocks. The company will have to deliver on its growth potential if share prices are going to move higher, but the possibility seems to exist for AMD to deliver significant returns if management can keep improving the company’s performance.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.