AMD's shares are currently hovering close to their 52-week minimum. Is this the propitious moment for investment?
Amidst the buzz surrounding technology and AI this year, you'd think Advanced Micro Devices (AMD -0.13%) would be soaring, not struggling. As of this past Monday, the chipmaker's shares have plummeted 15% this year, putting it dangerously close to its 52-week low. Despite its long-term promise, it's been a disappointing run.
Could this be the perfect time to jump on the AMD stock bandwagon?
Why hasn't AMD stock been shining this year?
If we compare AMD to its rival Nvidia (NVDA 2.99%), it's like night and day. Nvidia has been a hot ticket for years and now stands among the top three most valuable companies worldwide. Its $3.2 trillion market cap dwarfs AMD's modest $200 billion.
AMD's share price is trading at over 110 times its trailing earnings, and its revenue growth rate isn't exactly fierce compared to Nvidia's. It's been a different story for these two tech giants. While others are skyrocketing thanks to AI, AMD has been underperforming. To regain investors' trust, it'll need a major boost.
The company is confident in its prospects, forecasting record revenue in 2024, and boasting strong growth in several business sectors. However, given the tremendous growth we've seen from other tech companies this year, investors might be unimpressed.
There's a silver lining, though: AMD expects its growth rate to pick up speed for the fourth quarter. Management is predicting sales of around $7.5 billion, which would represent a 22% increase from the previous year.
AMD's cutting-edge chip could be a game-changer for the stock
AMD is aiming to make a splash in the AI chip market, and it might just grab a piece of Nvidia's market share. Companies might be on the lookout for more budget-friendly chip options, or simply seeking to diversify their supply chains.
According to AMD, the MI325X chip it recently launched is an impressive 30% faster than Nvidia's H200. If AMD can nail this advantage, it could provide some stiff competition for Nvidia, boost its revenue and profits, and potentially catapult the stock to new heights in 2025.
Is AMD stock a wise investment right now?
Despite its disappointing performance this year, there's a chance AMD could be a hidden gem for 2025. With its new chip about to hit the market and AMD expecting a surge in its growth rate, the pieces seem to be falling into place for a comeback.
Although its share price might seem pricey based on its trailing earnings, AMD is trading at a more approachable forward price-to-earnings multiple of 25 (based on analysts' consensus forecasts), making it a more accommodating buy for long-term investors. If AMD can leverage its potential in the AI chip market, it could easily stand out as one of the best stocks to buy right now, with investors overlooking it at their own risk.
In consideration of AMD's ambitious entry into the AI chip market and its projected growth rate improvement for the fourth quarter, some investors might consider AMD stock as a potential hidden gem for 2025. Given its more approachable forward price-to-earnings multiple compared to its trailing earnings, the stock could become an attractive option for long-term investors. However, the success of AMD's AI chip and its ability to gain market share from competitors like Nvidia will significantly impact its stock performance. Therefore, careful financial analysis and investment strategies are essential before making any investment decisions in AMD.
