AMD 44% below all-time high 📊What's next for semiconductor giant?

Advanced Micro Devices (AMD.US) shares are already trading nearly 50% below their 2023 peaks, having lost nearly 10% in the past week and 38% in the past six months. The semiconductor sector is still on Wall Street's 'radar' as one of the biggest beneficiaries of AI infrastructure. AMD is one of the biggest 'losers' in this phase of the cycle. So far, the shares of companies enabling AI infrastructure, Nvidia and Broadcom, among others, have gained 100% in 2024. Meanwhile, stocks with less exposure to artificial intelligence and more exposure to traditional PCs and servers have fallen. Among them, AMD and Intel (INTC.US). 

Wall Street cautious about AMD

• KeyBanc maintained an Overweight rating on AMD shares despite disappointing AI forecasts for 2025. Analysts lowered their price target to $150 from $220 previously, following concerns that increased production of NVIDIA's latest chips could limit AMD's access to scaling opportunities. 
• AMD's other concerns include weaker demand for the AMD MI325, which showed only marginal performance gains over its predecessor, the MI300. Forecasts for the MI3XX series, particularly the China-specific MI308 SKU, suggest limited market share growth potential.
• AMD's revenue estimates for data center GPUs in 2025 were lowered to $10 billion. The company attributed this to an anticipated higher share of sales from Chinese SKUs with a lower average selling price (ASP),
• KeyBanc views the current problems as rather short-term, and predicts that AMD will regain its competitive edge with the release of MI355 in the second half of the year, which is expected to drive more significant growth in 2026
• Goldman Sachs downgraded AMD shares and listed the company's rivals among the bank's picks for 2025; it advised clients to have exposure to both cyclical and leading AI stocks in the chip sector (including NXP Semiconductor, Teradyne and Broadcom).  The current target price for AMD at GS is $129, up from $175 previously
• Analysts cited more conservative forecasts for PCs and traditional servers, and modest growth in the company's data center graphics processing unit (GPU) business, given fierce competition from rivals. Goldman Sachs lowered the chipmaker's revenue estimates for 2025/26 by double digits.

Partnership with Dell and the prospect of greater market share?

Advanced Micro Devices (AMD) announced Monday an expanded line of PC processors with artificial intelligence for consumers and commercial users. The company unveiled its latest Ryzen processors for PCs with artificial intelligence support at CES 2025, and has obtained a partnership with Dell in this regard. These include the AMD Ryzen AI Max, Ryzen AI 300 series and Ryzen 200 series, as well as 'Pro' versions aimed at businesses. Computers with AMD processors are also available from Acer, Asus, HP (HPQ), Lenovo and others.

• Systems powered by Ryzen AI Max and Ryzen AI Max Pro Series processors are expected to be available in the first quarter.

• Meanwhile, AMD's Ryzen AI 300 Series processors are designed to support artificial intelligence in mid-range notebooks. They are also expected to be available in the first quarter.
• Finally, AMD Ryzen 200-series processors are aimed at lower-cost PCs and will be available in the second quarter.
• Rosenblatt Securities listed AMD stock as one of its eight “best ideas” for the first half of 2025. The company expects AMD to ultimately capture a larger market share of processors from Intel (INTC) and GPUs from Nvidia (NVDA) in 2025. It will also benefit from a broader semiconductor revival in chips other than artificial intelligence later in the year. Analysts at Bernstein have maintained their target price for AMD at $150.

Source: AMD

AMD financial results (GAAP) for Q3 2024

• Revenues: $6.8 billion - up 18% year-on-year and 17% quarter-on-quarter.
• Gross margin: 50%, up 3 percentage points year-on-year.
• Operating profit: $724 million - up 223% year-on-year.
• Net profit: $771 million - up 158% year on year.
• Earnings per share (EPS): $0.47 - up 161% year on year.

Business segments

Data Center

• Revenues: $3.5 billion (record level).
• Growth of 122% year-on-year and 25% quarter-on-quarter.
• Key impact: AMD Instinct GPU and EPYC processors.

Client

• Revenue: $1.9 billion, up 29% year-on-year.
• High demand for Ryzen “Zen 5” processors.

Gaming

• Revenues: $462 million, down 69% year-on-year.
• Reason: decline in sales of semi-custom components.

Embedded

• Revenues: $927 million, down 25% year-on-year.
• Improved demand in several end segments.

AMD estimates Q4 revenue at around $7.5 billion, up 22% year-on-year. The release of AMD EPYC 9005 Series processors and Instinct MI325X gas pedals is also pending. The company continues to work with companies like Google Cloud, Meta, Oracle Cloud Infrastructure, and Microsoft. It plans to expand its portfolio with new solutions, such as AMD EPYC Embedded 8004. More acquisitions are in the pipeline: ZT Systems and Silo AI.

AMD chart (AMD.DE)

AMD (AMD.DE) shares traded in euros, on the Frankfurt Stock Exchange. AMD's current share price decline from its peak is about 50%, similar to the 2021-2022 slump. 

Source: xStation5

AMD's financial multipliers (AMD.US)

With virtually zero debt and a future 12-month price/earnings ratio of 26, AMD's shares appear relatively undervalued, especially relative to historical levels. The company is targeting business expansion in 2024 and 10% k/k growth in data center revenue in Q4 2024, with data center revenue up 122% in Q3. AMD also forecast an improvement in gross margin from 50% to 54% in Q4 2024, and its earnings per share have been growing steadily for several quarters.

Source: XTB Research, Bloomberg Finance L.P.

Source: XTB Research, Bloomberg Finance L.P.