Advanced Micro Devices (NASDAQ:AMD) stock slid lower throughout September, because of both macro worries and the continued waning of “AI mania.” However, at the end of the month, AMD stock rallied, and it all had to do with the chip designer’s most talked-out growth catalyst.
Investors dove into AMD on the heels of a tech executive’s statements about its AI product offerings. Sure, glowing statements alone are hardly a reason to buy a stock. The rally was moderate and shares are now trading sideways. However, while these comments alone do not make the Advanced Micro Devices bull case, they help bolster it.
Given the ample potential from this company becoming a distant second in AI chips, you can imagine the possibilities if it ends up being a very formidable contender.
AMD Stock and the Latest AI Praise
A few months ago, it wasn’t inaccurate to say that Advanced Micro Devices was way behind its main chip competitor, Nvidia (NASDAQ:NVDA), in semiconductors for artificial intelligence applications. More recently, however, it has become clear that this company has played some serious catch-up.
As I discussed last month, AMD appears poised to experience a growth resurgence, thanks to its new MI300 AI accelerator chips.
CEO Lisa Su has stated that accelerator chips are just a few years away from becoming a $150 billion market. Merely capturing a small sliver of this market could materially improve AMD’s operating performance.
But now it’s not just this company’s own C-suite extolling its AI potential. On Sept. 27, at a tech industry conference, Microsoft (NASDAQ:MSFT) Chief Technology Officer Kevin Scott, said that Advanced Micro Devices is “making increasingly compelling GPU offerings.”
Scott believes this company will “become more and more important to the marketplace in the coming years.”
While somewhat vague, Scott’s comments do suggest that AMD could capture more than just a sliver of AI chip market share away from Nvidia.
What This Could Mean for AMD
Admittedly, this latest AI praise may not have much of a further positive impact on AMD stock. Investors reacted positively to the comments, but more pertinent issues are coming off the back burner.
Concerns about high interest rates, and their impact on both overall chip demand, plus on AMD’s valuation, could continue to weigh on shares.
In the months ahead, however, Scott’s remarks could be to be very prescient in hindsight. On Nov. 1, when Advanced Micro Devices next reports earnings, we will have the first indication whether the company is crushing it with AI-related sales.
In the coming quarters, much like what happened with Nvidia as it rolled out its AI chip offerings earlier this year, strong demand for these products could help outweigh the still-soft demand for AMD’s non-AI chips. A year from now, non-AI demand for AMD’s chips could make a full comeback.
Coupled with strong AI-related growth, the company’s overall earnings in 2024 may meet (or even beat) the top end of forecasts (over $6 per share). Add in interest rates potentially coming back down and another incredible run for this stock is well-within the realm of possibility.
At the Very Least, Add to Your Watchlist
If you currently own AMD, there’s no reason now to leave. Ignore the skeptics who say this stock will permanently give back gains accrued earlier this year. Selling now could prove to be a regretful decision.
The outside touting of the company’s AI bona fides, plus the prospect of materially stronger results in the coming year, signal higher prices lie ahead for shares.
If you don’t own it, buy Advanced Micro Devices. You’ll have to assume the possibility for more near-term turbulence, but with this high risk comes high upside potential.
Even if you are a bit more cautious, keep this stock on your watchlist, at the very least. Another sell-off could temporarily knock AMD stock lower. Creating an opportune long-term entry point, ahead of a further AI-driven comeback.
AMD stock earns a B rating in Portfolio Grader.
— Louis Navellier and the Investor Place Research Staff
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Source: Investor Place