In a surprising turn of events, Advanced Micro Devices (AMD) stock price has dropped 17% in 2024, leaving rival chip maker Nvidia at the forefront. This decline marks a significant reversal from last year’s performance, when AMD’s stock rose by an impressive 171%, surpassing that of Nvidia.
Several factors contribute to AMD’s disappointing performance, including the “Nvidia effect,” where Nvidia’s product pipeline is seen as being one year ahead in artificial intelligence performance. Additionally, major cloud players like Amazon and Google are opting for custom chips from Marvell and Broadcom instead of AMD.
However, analysts argue that AMD’s fundamentals paint a different picture. The company’s new AI chip, the MI300, has notched $1.5 billion in sales in the third quarter, representing the fastest product to reach $1 billion in sales ever for AMD. With estimated sales for 2024 reaching around $9.5 billion, analysts believe that AMD is on pace for at least 50% earnings growth this year.
Despite its underperformance, several analysts remain bullish on AMD’s potential, citing its strategy of optimizing solutions for high-volume AI workloads and its historical performance as a successful CPU supplier.
Analysts have adjusted their estimates, with some predicting that AMD could see significant earnings growth if the PC market remains strong. However, others point out that the company’s valuation is undervalued compared to competitors like Intel.
With the stock currently trading at a 24 times price-to-earnings multiple, many analysts believe that AMD has room for growth and could potentially benefit from its underperformance. As one analyst noted, “We remain buyers based on our view that the company continues to gain traction as the #2 supplier of merchant accelerator solutions.”
Source: https://finance.yahoo.com/news/3-problems-for-the-stock-price-of-nvidia-rival-amd-133029633.html