Analysis of AMD Stock: Reasons for the True Opportunity of AI

The company's stock price later recovered the lost ground, but there is still an opportunity for investors to profit from the market's shortsightedness. The remarkable performance of Advanced Micro Devices is precisely thanks to AI, demonstrating the strength of this chipmaker.

Advanced Micro Devices' revenue for the previous quarter decreased by 11% to $5.47 billion, but this was due to seasonal factors. Sales increased by 2% compared to the previous year, surpassing the midpoint of the guidance provided by the company. This increase was mainly due to a significant increase in AI sales. Analysts estimate that AMD generated $0.6 billion in revenue from data center AI graphics processing units (GPUs), which is an increase from $0 last year.

AMD's profitability has also significantly expanded, with gross profit margin increasing by 150 basis points to 52.3%. Net profit is $1 billion, and earnings per share have increased from 60 cents to 62 cents from the previous year.

As cloud, datacenter operators, and hyperscalers focus on acquiring AI accelerators, the datacenter business has the potential to be the biggest driver of AMD's growth. AMD predicts that datacenter GPU revenue will exceed $4 billion, suggesting the possibility of AI GPU sales approaching $1 billion at this growth rate. As chip manufacturers expand and accelerate their AI hardware and software roadmaps, AI revenue for this year has the potential to exceed $4 billion.

While the datacenter business is doing well, AMD's client division (mainly PCs) is still sluggish. The central processing unit (CPU) division achieved rapid growth of 80% compared to the previous year and 2% compared to the previous quarter, thanks to the strong performance of the AMD Ryzen 8000 series chips, but this is due to the fact that the comparison base has become much easier. Last year was a terrible year for PC CPUs, so it was an easily surpassable benchmark.

Along with the rapid expansion of AMD's AI products, AMD stock becomes the most promising potential investment opportunity for rapid growth. Especially as the years progress, it will become increasingly difficult for Nvidia, which is facing formidable competitors, to maintain its previous growth rate.

In other words, Advanced Micro Devices may experience similar growth rates in the future. The business scales may not be comparable, but there is a high likelihood that AMD's stock will emerge victorious.