Is Advanced Micro Devices Stock a Buy Now?

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John Ballard, The Motley Fool

Tue, Mar 25, 2025, 6:53 AM 4 min read

There's a large displacement underway successful the semiconductor industry. Intel has fallen down arsenic ample information halfway operators question much almighty chips to tally artificial quality (AI) models. This is benefiting 1 of the starring suppliers of graphics processing units (GPUs), Advanced Micro Devices (NASDAQ: AMD). While Intel banal has fallen 46% implicit the past 5 years, AMD shares person rocketed 166%.

The adjacent question of AI models volition necessitate exponentially much processing powerfulness than what is presently available, which is simply a immense accidental for AMD. While it trails Nvidia in the GPU market, AMD has made strategical moves to presumption itself for semipermanent growth. Its information halfway gross astir doubled successful 2024, and the stock's valuation is debased capable to enactment important gains if it tin support a dependable gait of innovation.

AMD entered the information halfway GPU marketplace successful precocious 2023 with the motorboat of its Instinct MI300 accelerators. Demand for these chips helped turn its information halfway AI gross to implicit $5 cardinal past year, oregon astir 20% of its full revenue. The company's pending $4.9 cardinal acquisition of ZT Systems could beryllium a game-changer for AMD's information halfway business.

The acquisition inactive has to person regulatory approval, but ZT Systems could bolster AMD's offering of end-to-end solutions, including systems and software, for AI-optimized information centers. This volition assistance constrictive the spread with Nvidia's broad solutions that see chips, networking, and software.

AMD besides has charismatic prospects successful cardinal processing units (CPUs) for user PCs. Strong request for these chips boosted gross successful its lawsuit conception by 52% successful 2024. AMD has positioned itself to payment from a perchance beardown upgrade rhythm successful the PC market, arsenic Microsoft ends enactment for Windows 10.

The chipmaker enters 2025 with its innovation pipeline looking strong. It volition motorboat the MI350 GPU for information centers this year, and it's already moving connected the MI400 that remains connected way to motorboat successful 2026. Meanwhile, its Ryzen AI processors for PC are optimized for Microsoft's Copilot AI adjunct and could thrust much maturation for its lawsuit segment.

AMD has large prospects successful the information halfway and CPU market, but it inactive faces risks that person weighed connected the stock's performance. The institution has seen crisp gross declines precocious for chips utilized for video games and concern markets, though these businesses marque up a tiny magnitude of its full revenue.

But investors besides can't underestimate Intel's quality to marque a comeback. While AMD has gained important stock against the long-reigning CPU leader, Intel inactive controls the bulk of the x86 CPU market. Intel besides has greater resources to put than AMD, arsenic it spends implicit $16 cardinal a twelvemonth connected probe and improvement compared to AMD's $6.5 billion.

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