How's AMD's fledgling AI business doing?

Advanced Micro Devices Stock (Nasdaq
Nasdaq
: AMD) recently announced Q1 2024 results that were slightly better than expected. Net income was $123 million, compared to a net loss in the same period last year, while sales were $5.47 billion, an increase of approximately 2% from the same period last year. AMD has benefited from an improving PC market and growing demand for artificial intelligence chips, but its gaming business, which makes chips for consoles and PCs, has faced headwinds.

Graphics processing units are becoming the de facto chip for running AI-related workloads. AMD's GPUs have typically been used more in gaming and professional applications compared to Nvidia's chips, which are the go-to GPUs for accelerated computing applications, but AMD is now poised to win in the AI ​​market. We are also focusing on AMD's data center division (which includes sales of server chips and MI300 series AI chips) rose about 80% year over year to $2.3 billion. AMD now projects AI chip sales of $4 billion this year, up from its January forecast of $3.5 billion. Given the surge in demand for AI applications and the need for Nvidia alternatives, the final number is very likely to be a bit higher.

AMD's gaming division's revenue fell 48% year over year to $922 million, but client revenue, which includes chips sold for PCs and laptops, rose 85% to $1.4 billion. This shows that the PC recession is finally over. AMD is also gaining market share in the server CPU market thanks to the AI ​​boom. Central processors are often used in conjunction with his AI chips in servers, which is driving further demand for the company. AMD also has an advantage over rival Intel
intel
faced challenges in moving to smaller, more advanced process nodes.

AMD stock has seen a very significant 80% rise from the $90 level in early January 2021 to around $160 today, compared to the S&P 500's roughly 35% gain over the past three years. Compared to the rise, AMD stock has seen a very significant rise. However, the rise in AMD stock has been far from consistent. The stock returned 57% in 2021, -55% in 2022, and 128% in 2023. By comparison, the S&P 500 returned 27% in 2021, -19% in 2022, and 24% in 2023.that AMD underperformed S&P In 2022. actual, Consistently outperforms the S&P 500 – Good times and bad times – In recent years, conditions have been difficult for individual stocks. Information technology sector stalwarts such as MSFT, AAPL, NVDA, as well as mega-cap stocks such as his GOOG, TSLA and AMZN.

In contrast, the Trefis high-quality portfolio, which includes a collection of 30 stocks, Outperformed the S&P 500 every year over the same period. why is that? As a group, Headquarters portfolio stocks carried less risk and delivered better returns compared to the benchmark index. It's not been a roller coaster ride, as evidenced by the performance metrics of our corporate portfolio. Considering the current uncertain macroeconomic environment of soaring oil prices and rising interest rates, AMD is likely to face a similar situation in 2022. Underperform the S&P Will we see a significant increase over the next 12 months?

AMD stock has seen meaningful gains over the past year. AMD's consensus 2024 earnings is approximately 44x, which is a relatively high multiple. However, the continued recovery of the PC market and the surge in demand for AI applications may justify this to some extent. We value AMD stock at approximately $163 per share, slightly above the current market price. Check out our analysis. AMD evaluation: Is AMD stock expensive or cheap? Learn more about AMD's price quote factors here. See also our analysis. AMD's revenue Learn more about the company's major revenue sources.

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