Should You Invest in AMD Stock Now? Here’s What to Consider.

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Since I questioned holding Advanced Micro Devices (NASDAQ:AMD) stock in January, it has gone sideways. So, more recently, has the whole AI boom thesis.

AI is not like the Internet boom of 30 years ago. The investment is front-loaded. It will take nearly $1 trillion of investment, in servers, clients, and networks, before AI applications mature. AI has yet to prove itself in the mass market.

AMD and AI

AMD is the second largest chip supplier to PC clients like HP (NYSE:HPQ) and Dell (NASDAQ:DELL). Its Ryzen chips will fight it out in a grand CPU battle with Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), and others using ARM Holdings (NASDAQ:ARM) designs.

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That future started today with CEO Lisa Su’s keynote address to Computex, the Taiwanese OEM trade show. It’s a big homecoming for Su, who was born in the city of Tainan. But it’s a lot more than that.

Su’s task is to keep a billion dollar market of OEMs like Acer and Asus on her side. The PC market fell hard in 2023, and only firm promises of growth will win the day. That’s what she will be selling.

Our Rich Duprey expects her to take home some big wins. The demands of AI will help bifurcate this market anew, he believes. He sees AMD winning with its Epyc workstation chips, optimized to work with Microsoft’s (NASDAQ:MSFT) Azure cloud.

If AMD can maintain its hold in the PC market as AI becomes a must-have Duprey sees it achieving Nvidia (NASDAQ:NVDA) growth rates. That will be Su’s pitch, but it’s not all up to her. It’s up to software developers to create demand for what AMD supplies.

Everyone in the AI Pool

The AI opportunity, however, has brought more competitors to the PC party.

I talked about Qualcomm last month. But don’t ignore Samsung (OTCMKTS:SSNLF).

The Korean chip manufacturer, which like Intel owns its own fabrication plants, is offering an ARM-based mobile processor line called Exynos. AMD, which dumped its foundry a decade ago, plans to use Samsung foundries for its next 3 nm chips, alongside Taiwan Semiconductor (NYSE:TSM).

The speed with which demand for AI PCs ramps depends on how fast AI applications become a must-have. Unlike the Internet, AI is going to be a top-down phenomenon. I expect a faster demand from the enterprise market for new PCs than consumers. To justify that businesses need enterprise AI applications from vendors like Salesforce.com (NASDAQ:CRM), ServiceNow (NASDAQ:NOW) and Adobe (NASDAQ:ADBE) to deliver productivity. Universities and research centers will also be quick to the market. Most are already AMD customers.

A Coiled Spring?

The fade in AMD stock hasn’t made it cheap. Investors are still paying over 10 times revenue to own it. Analysts don’t expect sales to ramp until the fall, with full-year revenue of $25.75 billion and 2025 revenue of $32.75 billion. The high end of 2025 earnings estimates would be a forward PE of 20.

The 35 analysts at Tipranks are mostly believers, with 29 telling clients to buy it. The traders at Stocktwits have a more neutral view. Technicians, however, see a lot to like in the recent action.

The Bottom Line

Young investors, who expect to buy not just through the current AI boom but whatever comes next, are wise to hold and accumulate AMD stock.

Older investors should be looking more to dividends and safety.

As of this writing, Dana Blankenhorn had a LONG position in INTC, MSFT, NVDA, NOW, CRM, and TSM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.

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