Advanced Micro Devices (NASDAQ: AMD) has been on a journey that would make even the most dramatic Hollywood rags-to-riches plots look timid. Since Dr. Lisa Su took on the mantle of chief executive officer in October 2014, the company has not only weathered the storm but, like a phoenix from the ashes, risen to astounding heights, painting the stock market red with investor delight.
At the time of Su’s appointment, AMD teetered on the brink of insolvency, with its stocks languishing at a pitiable all-time low of just over $3 per share. However, under Su’s decisive leadership, the company steered away from the abyss by refocusing on its core strengths: high-performance central and graphics processing units (CPUs and GPUs).
This strategic pivot allowed AMD to carve out a prominent position in thriving industries like artificial intelligence (AI), supercomputing, and video games. Notably, with the launch of its Ryzen line of CPUs, AMD has relentlessly seized market share from its archrival, Intel. AMD’s CPU market share skyrocketed from 18% in 2017 to a commanding 36% in the fourth quarter of 2023, while Intel’s grasp dwindled from 82% to 61%. The proverbial tide had turned.
Data by YCharts
AMD’s stock has soared over 4,000% since Dr. Su’s assumption of leadership nearly a decade ago, translating a $10,000 investment at that time into a jaw-dropping $422,500 today. The return on investment, akin to a jackpot at a slot machine, has left early investors in awe.
AMD is only just getting started in artificial intelligence
The burgeoning artificial intelligence (AI) market, predicted to expand at a blistering compound annual growth rate of 37% through 2030, hints at an industry set to surpass a $1 trillion valuation by the end of the decade. Rife with opportunity, this surging sector has been predominantly dominated by chipmaker Nvidia, known for commanding an estimated 90% market share in AI GPUs.
Yet, the unparalleled growth prospects of AI signal ample room for contenders like AMD to assert their sway in the industry. The forthcoming launch of AMD’s groundbreaking MI300X AI GPU, a challenger to Nvidia’s dominance, is poised to shake up the status quo.
The card’s resounding potential has already captured the attention of titans in the AI domain, with Microsoft‘s Azure taking the lead by announcing the adoption of MI300X to elevate its AI capabilities. Notably, Microsoft holds a formidable 49% stake in ChatGPT developer OpenAI, making this alliance a game-changer for AMD.
Furthermore, the AI chip has also found favor with Meta Platforms, set to deploy it for AI inferencing. AMD’s foray into AI marks the dawn of a promising era, presenting a golden opportunity for savvy investors.
The increased involvement in the AI landscape implies that AMD could be on the cusp of a prolonged period of expansion.
How high could AMD’s stock rise?
AMD’s shares have surged to record peaks under Su’s stewardship. However, in the ever-evolving tech industry, a realm known for rewarding innovative companies and their investors with substantial long-term gains, the possibilities remain boundless. Positioning itself as a premier chipmaker, AMD enjoys a strategic advantage by supplying its hardware to entities across the industry. The escalating demand for chips portends a potential uptick in AMD’s stock value.
In an alignment with Wall Street’s optimism, Rosenblatt Securities analyst Hans Mosesmann has set a price target of $200 for AMD, signifying a sizable 45% increase from the stock’s present position.
Data by YCharts
Mosesmann’s affirmative prediction is bolstered by forecasts suggesting that AMD’s earnings could reach $5 per share in its upcoming fiscal year. Multiplying this figure by the company’s forward price-to-earnings ratio of 36 yields a stock price of $180, almost mirroring Mosesmann’s prognostication. Earnings-per-share estimates propose a 30% surge in AMD’s shares by fiscal 2024.
Given its expanding presence in the AI landscape, AMD emerges as one of the most alluring stocks in the current market scenario.
Should you invest $1,000 in Advanced Micro Devices right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
