Advanced microdevices NASDAQ: AMD experienced significant market volatility in recent months. Bye AMD revenues fiscal third quarter 2024 (3QFY24) report was solid, beating revenue expectations, AMD stock price initially fell as much as 18% due to concerns about valuation and competition. The sell-off appears to have stabilized, providing insight into the stock’s potential to recover and continue to rise in 2025 and beyond.
Setting the stage: A look at the third quarter of fiscal year 2024
Advanced microdevices today
Advanced microdevices
(As of 12/4/2024 6:03 PM ET)
- 52 week range
- $116.38
▼
$227.30
- P/E ratio
- 129.72
- Target price
- $192.79
AMD’s fiscal third quarter 2024 earnings showed impressive year-over-year growth, with revenue rising above AMD Analyst community ratings and demonstrating high demand for AMD products. The data center segment played a critical role, primarily driven by the growing adoption of AMD Instinct GPUs and EPYC processors in artificial intelligence (AI) related applications. While other segments posted mixed results, overall financial results showed a positive picture, although investors initially expressed concerns about the company’s valuation, causing the share price to fall.
Post-earnings strategy
Since reporting fiscal 2024 third quarter earnings, AMD’s stock price has continued to fluctuate. While the initial drop in post-earnings earnings was notable, subsequent price movements were influenced by a variety of factors. Since the report’s publication, new product launches, including the innovative Ryzen 7 9800X3D processor and the Versal Premium Series Gen 2 adaptive SoC platform, have generated positive news and potentially impacted trading activity, slowing AMD’s growth rate. Investor confidence was further bolstered by news of ongoing development efforts, especially strategic partnerships with major industry players and collaborations with renowned game developers.
The artificial intelligence revolution and more
AMD’s long-term growth prospects remain strong, largely driven by the growing AI market. AMD’s strategic investments in high performance computing (HPC) and advanced technologies position it to capitalize on this expansion. Designed to support AI workloads, Instinct MI300X and MI325X GPUs are widely adopted by major cloud providers to support their large language models and high-performance computing infrastructure.
These chips demonstrated significant performance advantages over competitors in benchmarks, giving AMD a significant share of the high-performance computing market and contributing to positive results in the data center segment. In addition, AMD EPYC processors are widely used by numerous cloud service providers, including some of the world’s most prominent technology companies, for a variety of artificial intelligence workloads, demonstrating the versatility and efficiency of AMD processors in this important sector.
Beyond artificial intelligence, AMD’s continued investment in innovative technologies is likely to fuel further growth. The recent launch of the Ryzen 7 9800X3D processor with enhanced 3D V-Cache technology is expected to maintain AMD’s competitive advantage in the high-end desktop market, potentially increasing sales and market share. The Versal Premium Series Gen 2 Adaptive SoC platform further strengthens AMD’s position in the fast-growing embedded market, opening the door to new revenue streams in data centers, communications and various other sectors. The company’s continuous development efforts and strong strategic partnerships ensure a robust product portfolio and continued growth in all key segments.
AMD Valuation: High Expectations, High Stakes
AMD’s current valuation reflects significant investor optimism about its future growth prospects. However, some indicators point to a premium valuation. price-earnings ratio (P/E) ratio, price/sale (P/S) and price-to-book (P/B) ratios are above industry and major competitor averages. NVIDIA NASDAQ: NVDAindicating that the market places significantly higher value on each dollar of AMD’s earnings and revenue. This premium valuation is largely driven by market expectations for strong growth in AMD’s data center and artificial intelligence businesses.
Advanced Micro Devices MarketRank™ Stock Analysis
- Overall MarketRank™
- 100th percentile
- Analyst rating
- Moderate purchase
- Pros/Cons
- Growth potential 33.9%
- Short interest level
- Healthy
- Dividend Power
- N/A
- Environmental assessment
- -1.86
- Mood News
- 1.20
- Insider trading
- Sale of shares
- Project Profit Growth
- 63.78%
See full analysis
The analytics community reflects these diverse sentiments. While the consensus rating for AMD remains a Moderate Buy, indicating overall positive sentiment, a closer look reveals a range of opinions. A large number of analysts have issued Buy ratings, typically with price targets between $180 and $250, reflecting confidence in the company’s technological prowess, the growing artificial intelligence market, and AMD’s strong strategic partnerships.
However, a smaller but still significant number of analysts issued Hold ratings, citing concerns about high valuation multiples and the competitive environment, warning investors of the risk of a price correction if AMD fails to meet ambitious market growth expectations. Thus, while the overall sentiment is optimistic, investors should recognize the wide differences in analyst opinions and take this into account when formulating their investment strategies.
AMD: a compelling choice for risk-tolerant long-term investors
Bye The outlook for AMD is positive, but the potential risks must be acknowledged. High stock valuations pose a risk to investors if growth falls short of expectations. Intense competition, economic downturn and the inherent volatility of the semiconductor industry also create serious problems.
Despite some near-term market uncertainty and cost concerns, AMD’s long-term growth potential in the AI and data center markets remains significant. A portfolio of strategic products, partnerships and ongoing innovation support investor optimism. However, the high score requires careful consideration. For risk-tolerant investors with a long-term horizon, AMD can be an attractive addition to a diversified portfolio. However, investors should conduct careful due diligence and closely monitor AMD’s performance and competitive position before making any investment decisions.
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