Semiconductor stocks have become a top pick among investment opportunities in the artificial intelligence (AI) realm. Nivea It has been the most popular among chip stocks in the last couple of years, and for good reason. The company’s graphics processing units (GPUs) play a major role in the development of generative AI, and companies around the world can’t get enough of what Nvidia has to offer.
While it remains a strong opportunity at the intersection of semiconductors and AI, I now see another stock that looks like a better value. Below, I break down the current price action. Advanced Micro Devices(NASDAQ: AMD ). And I’ll explain why I think the company is well-positioned for years of strong growth despite a tough matchup with Nvidia.
The chart below shows the price movement between AMD and several leading semiconductor stocks VanEck Semiconductor ETF last year. Unlike its peers, AMD’s shares have fallen sharply — and since Jan. 14, the stock is hovering at a 52-week low.
Given how important the chips are to AI development, what’s driving AMD stock to sell off when the competition is getting so much support from investors?
From what I can gather, the poor sentiment around AMD comes down to growth – or lack thereof. Currently, the company’s top line is growing at a modest 18 percent. Compared to Nvidia, which has nearly triple-digit sales growth, it looks pretty weak. However, I think investors are missing the forest for the trees.
Image source: Getty Images
While AMD’s overall revenue growth may seem muted when measured against the competition, it’s important to look at the finer details before jumping to conclusions. The company divides its revenue into four main categories: data center, consumer, gaming and embedded.
Currently, the company’s games and embedded components are not growing at all. Unfortunately, this lack of growth is cannibalizing the thriving business areas. Data center business grew 122 percent year-over-year, according to the company’s latest financial report — Same with Nvidia’s. Data center GPU unit.
Despite this impressive development, AMD has a Price/earnings-to-growth ratio (PEG) Only from 0.3. This indicates that analysts are concerned about how strong the company’s data center business is and may be muted on its growth estimates. Note that a stock with a PEG ratio of less than 1 is generally undervalued.
This year will be interesting for the chip space. Investors and Wall Street analysts are going to pore over every statistic surrounding Nvidia’s new Blackwell GPU — which is already sold out for the next 12 months. On the surface, this is good news for Nvidia, but I think AMD has a big opportunity lurking in the background.
That said, these supply and demand dynamics present an interesting opening for AMD as the company can compete on price and offer a good solution when businesses can’t easily get their hands on NVIDIA GPUs. Such an idea is not reasonable to buy.
Last year for A.D.D. Oracle, MicrosoftAnd Meta forums. While each of these companies also relies on Nvidia’s GPU architecture, they have also made moves to diversify their AI infrastructure by supplementing their respective Nvidia stacks with products developed by AMD.
When you consider that AMD already has successor chips slated for release in 2025 and 2026, I think the company has an opportunity to capitalize on the ongoing demand movement in the semiconductor landscape by offering a number of alternative solutions. to NVIDIA’s product suite – all at an affordable price point.
To me, investors should focus on the growth trend around AMD’s data center GPU segment. If the company continues to accelerate this unique business venture, I think it’s only a matter of time before investors start weighing in on its size and shares start to open up.
I view AMD as a compelling long-term opportunity for AI investors and think that continued depressed price action makes now a good time to buy the stock.
Have you ever felt like you missed the boat by buying the most successful stocks? Then you want to hear this.
Occasionally, our team of expert analysts a “Double bottom” stock Advice for companies who think they’re about to pop up. If you’re worried you’ve missed an investment opportunity, now is the time to buy before it’s too late. And the numbers speak for themselves-
Nivea:If you invest $1,000 when we double in 2009,You will have $353,272!*
Apple: If you invest $1,000 when we double in 2008, You will have $45,049!*
Netflix: If you invest $1,000 when we double in 2004, You will have $457,459!*
Right now, we’re giving out “Double Down” alerts for three amazing companies, and there may not be another chance anytime soon.
Randy Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco It has positions in Meta Platforms, Microsoft and Nvidia. He has a position in the Motley Fool and recommends Advanced Micro Devices, MetaPlatforms, Microsoft, Nvidia, Oracle and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has Disclosure Policy.
