Will AMD Stock’s Comeback Continue or Stall Out?

The semiconductor market now consists of big names that are vying for a greater market in the AI accelerator segment. There are several big names floating around, of course, NVIDIA Corporation (NASDAQ:NVDA) being the most popular and the largest among them.

Today, we look at one of its competitors, Advanced Micro Devices, Inc. (NASDAQ:AMD) to see whether it has a chance of gaining a greater market share after DeepSeek shook up the AI accelerator front.

The company had a tough 2024. Over the past year, AMD’s stock declined by more than 50%, while over the past six months, the stock has lost over 27%. It is currently trading below its moving averages, indicating a downturn. This also means that it is trading relatively cheaper than its peers.

Its price is sitting at 21.43x its forward non-GAAP earnings, which is lower compared to the industry average at the moment. So, based on its fundamentals, can the stock stage a comeback, and is this an opportunity to pick up Advanced Micro Devices at cheap prices?

Let’s look at AMD a bit more closely…

What Is Happening in the Chip Sector and How Does It Affect AMD?

There’s a disruptive force at play in the AI sector. It has somewhat changed the perspective on the semiconductor sector as well, as the majority of tailwinds in the sector are driven by AI and data centers.

Chinese Gen AI startup DeepSeek started this year with a bang by launching its DeepSeek-V3 model, which was touted as being on par with or better than the industry-leading Gen AI models. The catch is that V3 was built on a budget far lower than the other models. It was built on less than $6 million worth of computing power from H800 chips that come from NVIDIA.

This has shaken up the market because companies can now see that AI models can be created at lower costs, which has the potential to dampen spending. This does put a cloud of uncertainty over the chip giants who have seen broad-based tailwinds based on costly chips that power those models.

Truth be told, AMD is quite behind the graphics processor units (GPUs or the processors that power AI) race, as NVIDIA seems to be encompassing the whole market. Nevertheless, if a spending slowdown comes, AMD is also likely to be affected.

There’s also some pressure in the conventional central processing units (CPUs) segment. The company is in a stiff race with Intel Corporation (NASDAQ:INTC) and has managed to gain some market share. Yet, Intel’s latest Granite Rapids series looks to be a bit better now and comes at a better price.

There can be a silver lining in all this, though. If DeepSeek’s success puts the spotlight on the fact that companies need not bear too high costs for chips to power AI models, then they might start preferring AMD’s chips over NVIDIA’s chips because of their low price range.

Semiconductor players are finding new use cases, which basically means new growth channels. So, regardless of short-term fluctuations, the chip industry is set to mushroom. AMD has a presence in both the GPU and CPU space, so as computer hardware keeps evolving, the one-time Intel arch-rival may enjoy broad-based tailwinds. It’s likely just a patience game when it comes to this chip giant.

The company chief, Lisa Su, has essentially downplayed the risks that DeepSeek supposedly poses to Silicon Valley chip giants. Su believes that innovation in models is good for AI adoption and also gives chip companies the ability to train and infer their own abilities.

Will AMD Stock Come Back Up?

AMD stock is likely to bounce back with conviction according to analysts who have a $148 per share target price on it. If they are proven to be right, expect a 51% gain in AMD share price over the next 12 months.

Management reported Q4 and fiscal year earnings for last year and the general view among the Street’s analysts was that AMD’s future may be filled with rocky roads and uphill sledding.

The top line figure came in at $7.66 billion, which was a gain of 24% year-over-year and a record for the chipmaker. Better yet, it beat the $7.53 billion that Wall Street analysts were forecasting.

The data center segment was where the proverbial holy grail in the AMD empire resided. It reported $3.9 billion in revenue, up 69% year-over-year thanks to Instinct GPU shipments and strong AMD EPYC CPU sales. Unfortunately for shareholders, it fell short of the $4.14 billion sales that Street analysts had been expecting. This also triggered multiple firms on Wall Street to trim their expectations on the stock.

AMD is holding onto profitability well at the moment. On a GAAP basis, earnings per share was down by 29% from the year-ago figure due to the effect of rising operating expenses more than offsetting the higher revenue gains. Non-GAAP EPS was up 42% year-over-year to $1.09, eclipsing expectations.

So, the company is not exactly in the trenches now. We would argue that financially, it is in a good position. Yet, it might be wise to watch out for the weakness that analysts see in its data center segment.

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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.