Most investors in the technology sector have been focused on trends and developments related to artificial intelligence, especially those in the semiconductor industry, which is responsible for creating the infrastructure needed to allow these models to operate and evolve based on the data they are fed. The industry’s favorite is in NVIDIA Company NASDAQ: NVDAbut there are signs that a new challenger may be knocking on the door of another mass rally.
While NVIDIA has dominated the artificial intelligence and semiconductor space through 2024 and much of 2023, some might say it has gone too far as valuations reach sky-high levels. Future growth rates projected by Wall Street analysts are not high enough to potentially justify today’s estimates, let alone higher ones. Knowing this, investors could look to other names in the space for a better risk/reward ratio.
Advanced microdevices today
Advanced microdevices
(As of 5:45 p.m. ET)
- 52 week range
- $117.90
▼
$227.30
- P/E ratio
- 112.67
- Target price
- $191.96
And this is where the shares Advanced Micro Devices Inc. (NASDAQ: AMD, also known as AMD, comes into play.
Key valuation multiples relative to industry peers highlight that AMD offers one of the best potential buying opportunities.
Wall Street analysts agree, and even institutional investors are finding it reason enough to buy the stock heading into the new year.
What makes AMD stock better than its peers today?
Share prices are typically influenced by two things: interest in the stock from the broader market and earnings per share (EPS). With this basic set, investors can evaluate whether a stock is favored by the market or not.
This is where price action becomes important. There is a huge gap between AMD stock, which is currently trading at 55% of its 52-week high, and NVIDIA stock, which is still trading at 92% of its 52-week high. Investors can safely assume that NVIDIA has won the market popularity contest today.
But what about tomorrow? This is where the fundamentals start to matter going forward, and it appears that AMD has amassed enough evidence in this area to make it potentially a better buy than NVIDIA today. Let’s start with Wall Street’s EPS forecast of $4.91 for the next 12 months, which would imply a net jump of 48.3% from today’s $3.31 EPS.
Compared to NVIDIA’s earnings per share forecast of $4.14 per share, which would result in core earnings rising by only 41.3%, AMD appears better positioned to capture the market premium in this regard. However, a growth rate difference of less than 10% is not a sufficient reason to buy the stock; assessments must be taken into account.
On a forward price-to-earnings (P/E) ratio, which is how markets price today’s earnings tomorrow, AMD trades at 25.6x compared to NVIDIA’s multiple of 34.0x. This significant discount makes NVIDIA look a little more expensive, but the trend doesn’t end there.
When comparing the two on a book-to-book (P/B) basis, NVIDIA stock trades at a whopping 51.4x, while AMD stock trades at just 3.9x today. Looking at it from this perspective, investors can see that NVIDIA’s comparable EPS growth rate doesn’t really justify such a high price.
Wall Street wants to close the gap
Looking at all these discrepancies between AMD and industry leader NVIDIA, some Wall Street analysts realized a potential easy win for their careers and reputations. Especially those from Citigroup, which as of October 2024 issued and maintained a Buy rating on AMD shares, this time with a $200 price target.
Advanced Micro Device Stock Forecast Today
$191.96
Growth potential 52.74%Moderate purchase
Based on ratings from 31 analysts
| High forecast | US$250.00 |
|---|---|
| Average forecast | $191.96 |
| Low forecast | US$155.00 |
Advanced Micro Device Inventory Forecast Details
To prove these views correct, the stock would need to rise to 59% of where it is trading today, not to mention approach its 52-week high. As bullish as these forecasts were, these analysts weren’t the only ones willing to make their optimism public.
Institutional buyers on State Street decided to increase their holdings of AMD shares by 2.3% as of November 2024, peaking today at $11.5 billion, or 4.3% ownership in the company, to give investors another bullish indicator. which you can rely on. .
Even bears know better than to bet against this stock, as short interest in the company is down 8.8% over the past month, a sign of bearish capitulation to all the bullish factors in the market today.
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