Advanced Micro Devices (NASDAQ: $AMD) hit an all-time high on Thursday, crossing the $300 billion market cap threshold for the first time. The semiconductor company’s stock rose nearly 10%, fueled by bullish analyst coverage of the AI chip sector.
This milestone caps an incredible turnaround for AMD after the company hit a low point financially in 2015. Since then, AMD has fueled growth through new product development and improved profitability. Over the past six years, AMD’s stock has skyrocketed on the back of this revival. Last month, optimism around AMD’s new AI processors also helped increase shares.
AMD is competing with Nvidia in the AI chip race. Nvidia’s stock moved higher after an analyst reiterated his bullish view and highlighted promising trends in AI. A new Nvidia partnership announcement also buoyed sentiment. While one competitor’s success does not directly benefit AMD, the overall momentum behind AI adoption points to broad-based opportunities in this technology arena.
AMD Takes Market Share From Intel
In the fourth quarter of 2023, AMD took CPU market share from Intel in both the PC and server categories, according to Mercury Research. AMD’s desktop PC processor share rose to 19.8% versus 18.6% a year earlier. The company’s notebook PC processor share climbed to 20.3% from 16.4% in the same quarter last year.
Most notably, AMD’s share of the lucrative server CPU market jumped to 23.1% in Q4, up from just 17.6% in the prior year. It demonstrates AMD’s strong competitive position in the critical data center category.
2023 Earnings Highlights
For 2023, AMD generated revenue of $22.7 billion, a 46% gross margin, $401 million in operating income, $854 million in net income, and $0.53 in diluted EPS. On an adjusted non-GAAP basis, AMD reported a 50% gross margin, $4.9 billion operating income, $4.3 billion net income, and $2.65 diluted EPS in 2022.
AMD CEO Dr. Lisa Su said, “We finished 2023 strong, with sequential and year-over-year revenue and earnings growth driven by record quarterly AMD Instinct GPU and EPYC CPU sales and higher AMD Ryzen processor sales. Demand for our high-performance data center product portfolio continues to accelerate, positioning us well to deliver strong annual growth in what is an incredibly exciting time as AI re-shapes virtually every part of the computing market.”
Q1 2024 Outlook
For Q1 2024, Advanced Micro Devices expects revenue of approximately $5.4 billion, representing solid growth compared to the $5.1 billion generated in the same quarter last year.
Advanced Micro Devices anticipates data center sales will be flat sequentially as surging data center GPU demand offsets lower server revenue. The company sees the client, embedded, and gaming segments declining from Q4 levels. Advanced Micro Devices also expects a significant double-digit percentage decrease in semi-custom sales, which includes gaming console chips.
Encouragingly, AMD forecasts that non-GAAP gross margin will climb to approximately 52% in Q1 2024 from 50% last year, highlighting continued profitability momentum.
AMD’s Market Performance
AMD’s share price saw impressive gains on Thursday, 29 February 2024, closing 9.06% at $192.53. This latest surge marks a new 52-week high for the stock at $193, capping off a tremendous 116.56% rise over the past year, compared to the 25.31% gain of the S&P 500 index.
The stock has risen significantly from its 52-week low of $78.52. The 50-day moving average stood at $160.93, while the 200-day moving average was $123.96
Trading volume over the last three months has been robust, averaging around 74 million shares per day with 1.62 billion shares outstanding. Overall, AMD’s share price action reflects its strong financial results and dominant position in key growth markets like data centers, PCs, and gaming.
Wall Street Remains Bullish on AMD
According to 34 Wall Street analysts, the average 12-month price target for AMD stock is $196.65, representing a potential upside of around 2% from current levels. Among the analysts, 29 recommend buying AMD shares, while 5 advise holding.
The highest price forecast of $270 suggests AMD could surge over 40% higher in the year ahead. Even the lowest target of $140 implies that shares are fairly valued. However, the prevailing sentiment among analysts remains overwhelmingly positive for AMD’s prospects.
AMD is an Attractive AI Stock Play
AMD’s stock is charting new highs, poised to capitalize on the burgeoning opportunity in AI chips. Demand for AI technology is rapidly accelerating as organizations across sectors look to take advantage of its transformative potential. Advanced Micro Devices appears well-positioned to ride this wave.
Backed by advanced new processing architectures and expanding market share gains, AMD should be able to drive robust growth. AMD’s push into AI comes as the company is hitting its stride financially. With strong sales, earnings, and profitability momentum, Advanced Micro Devices is an attractive AI chip investment at current levels for long-term investors.
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