However, a case can be made that AMD may be the stock with the bigger opportunity.
Advanced Micro Devices (NASDAQ:AMD) is emerging as a significant player in the world of AI chips. Indeed, Nvidia (NASDAQ:NVDA) remains the dominant player in this space. However, AMD’s recent financials show a rising trajectory, with the company’s data center revenue hitting a record $2.3 billion, reflecting an 80% year-over-year (YOY) increase. Those impressive numbers were driven by strong Ryzen and Instinct sales.
Additionally, AMD’s recent acquisition of Silo AI for $665 million marks a major step into artificial intelligence (AI) software, aiming to offer a complete AI solution. Despite stiff competition, AMD is gaining ground in AI chips, with growing market share and strategic partnerships. The Instinct MI300X GPU and AI accelerators are set to drive future growth in enterprise and data center markets.
Bank of America (NYSE:BAC) recently named AMD a top pick for Q3 of fiscal year 2024. Reasons for this pick include AMD’s innovation includes AI-accelerated Ryzen chips and upcoming 5th Gen Epyc CPUs.
Analysts estimate AMD stock could rise 17% to $187.20 per share, at least on a consensus basis. These estimates are based on expected growth rates of 33% this year and 59% next. Currently, AMD stock trades at a 28.6-times forward price-earnings ratio, with an even more eye-watering multiple of 209-times trailing earnings reflecting its high growth potential.
Other experts following this stock continue to focus on AMD’s improved technology and competitive edge under Chief Executive Officer Lisa Su. That’s notable, since we’ve seen a very positive market reaction to the company’s new AI GPU products.
AMD fans eagerly await the Ryzen 9000 series launch, set to take place later this month. The company announced a webinar to unveil key details, requiring registration. AMD’s August 8, 2024 webinar, led by Donny Woligroski, will cover the Ryzen 9000’s Zen 5 architecture, 4nm process and EXPO overclocking technology. Investors who are interested in the specific details that will be released are encouraged to register on the official webinar page to attend.
While Nvidia dominates the semiconductor sector, AMD is emerging as a strong rival. AMD recently acquired Silo AI, Europe’s largest AI lab, for $665 million. Over the past year, AMD invested $125 million in AI and acquired startups Nod.ai and Mipsology. With past acquisitions like Xilinx for $50 billion, AMD’s aggressive strategy highlights its commitment to growth and innovation.
AMD is certainly not Nvidia, and will likely lag the top high-performance chip maker in terms of growth for some time. However, while AMD is a relative laggard, compared to other major chip makers, the company’s growth rate impresses. On a forward basis, this stock doesn’t look overly expensive. And, it could have much more room to run if its future product launches pick up.
With strong strategic acquisitions into key high-growth areas, this is a stock I think is worth considering at current levels. Of course, if we see a sector-wide dip, all the better. Thus, this is a stock I think is best adding over time, with dollar cost averaging being investors’ best friend right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.