Bank of America’s Top Pick: AMD Stock Set to Dominate Q3 2024 – InvestorPlace
This chip stock could be worth considering
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Appearing quite undervalued compared to its peers, Advanced Micro Devices (NASDAQ:AMD) is in a strong position AI-wise. Just like Nvidia, AMD benefits from growing investor interest in AI chips. The market also expects AMD stock to reach $265 or above, showing potential growth.
In the two months since AMD’s AI-driven MI300X accelerator release, the chipmaker generated $1.5 billion in sales. Data center revenue surged 80% in Q1 to $2.3 billion, with segment profits tripling to $541 million.
AMD plans to release the Instinct MI325X accelerator in Q4, enhancing its AI capabilities further.
Bank of America identified AMD as a top “best of breed” stock for Q3 2024. AMD leads in AI PCs, launching the Ryzen 7040 with built-in AI acceleration in January last year, followed by the Ryzen 8040. AMD’s Ryzen AI 300 series laptops are slated for release by July 2024.
AMD also excels in the data center sector, previewing 5th Generation Epyc Gen CPUs (code-named Turin) and Instinct MI-300 series GPU accelerators. Built on Zen5 core CPU architecture, AMD’s server chips are highly anticipated. Analysts project a target of $187.2, indicating a 17% potential upside. Growth forecasts predict a 33% increase this year, 59% next year, and an average 32% annually over the next five years, supported by a 28.6X forward P/E ratio aligned with its growth trajectory.
CEO Lisa Su’s strategies revitalized AMD’s tech against Intel and Nvidia, driving market share gains and profit growth. Despite reducing exposure post-strength, AMD remains poised for market expansion and fair valuation relative to earnings potential.
AMD prioritized power efficiency with Ryzen processors since 2017, though the Ryzen 7000 deviated with higher TDPs. Despite this, AMD maintained superior efficiency over Intel. The upcoming Ryzen 9000 CPUs will focus on power efficiency, not shipping with Precision Boost Overdrive (PBO) enabled by default. Unlike the hot-running Ryzen 7000, the Ryzen 9000 “Zen 5” will operate cooler.
The Ryzen 9 9950X (Granite Ridge flagship) consumed 190W, lower than the 7950X’s 230W and Intel’s 15900K’s 253W. It performed 35% faster than the 7950X with 25% less power in Cinebench R23. The 9950X, unlike Intel’s Core i9-14900KS, which used up to 300W, also supported Precision Boost Overdrive (PBO) but was recommended only for multi-threaded tasks, impacting efficiency and thermals.
Set to be released on July 31, the Ryzen 9000 is expected to be lower than the Ryzen 7000. Both models are compatible with the 600 series and 700 series motherboards.
Mostly used in data centers and computers, AMD’s chips could benefit from the AI boom. Moreover, fueled by AI, its data center expansions could grow 10% through 2030. Existing centers are also rapidly upgrading for AI workloads. The company has always been focused more on the AI data chip center to grow up to $400 billion in 2027.
Although its still coming after Nvidia, AMD still holds significant market share with more competitive and faster chips. In Q1 2024, AMD’s data center revenue reached $2.3 billion with more uptrend as the market expands.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
Technology, Artificial Intelligence, Semiconductor
Article printed from InvestorPlace Media, https://investorplace.com/2024/07/bank-of-americas-top-pick-amd-stock-set-to-dominate-q3-2024/.
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