Advanced Micro Devices (AMD) shares have underperformed in recent months, mainly due to its smaller size compared to Nvidia (NVDA). However, AMD’s fundamental strengths and attractive price-to-earnings-to-growth (PEG) ratio of 0.53 suggest it may be undervalued.
Recent market commentary suggests that DeepSeek’s arrival could threaten the US tech sector, particularly for companies like AMD and NVDA. Yet, several reasons suggest this reaction is overblown. For instance, training costs are not directly comparable to inference demands, which require significant GPU/TPU-intensive hardware. Moreover, AMD has an inference advantage with its MI300 GPUs, outperforming Nvidia in FireAttention V3 benchmarks.
Furthermore, investors should note that the selloff assumes DeepSeek reduces hardware demand but overlooks the scalability of inference workloads, driving chip demand more than training. With AMD’s competitive position within AI-specific optimizations and its expanding market share gains, particularly in AI and data centers, it is a promising investment opportunity.
Recent earnings results show significant growth in Ryzen CPU revenue and PC market share, despite uneven progress in gaming and embedded segments. Analysts expect incremental gains in 2025, driven by MI350 adoption and software maturation. With a diversified strategy, robust financial position, and attractive valuation, AMD’s long-term prospects look promising.
The company’s forward price-to-earnings (P/E) ratios indicate strong earnings growth expectations, with the PEG ratio indicating undervaluation relative to peers. The price-to-earnings-to-growth ratio of 0.53 is a significant discount, implying that AMD’s stock is potentially undervalued given its growth prospects.
Overall, despite some short-term volatility, AMD’s long-term potential and attractive valuation make it an investment opportunity worth considering.
Source: https://finance.yahoo.com/news/why-amd-stock-could-outshine-103032229.html