What Is Really Going On With AMD Stock?

Summary

The video analyzes AMD's current stock performance, highlighting concerns about its growth prospects in 2025. Despite impressive revenue growth, especially in data centers, analysts warn of increasing competition from Nvidia and Intel, as well as the challenges of meeting high AI revenue expectations. AMD’s underperformance in gaming and client segments adds to the uncertainty. While analysts are cautious about the company’s ability to meet fiscal 2025 targets, the stock remains attractive for long-term investors, though technical indicators and market conditions suggest caution.

Takeaways

• 😀 AMD's stock has been underperforming, down over 15% year-to-date, despite a market cap of $22.8 billion, which is more than double Intel's market cap.
• 💡 Analysts are expecting AMD's AI-related revenue to grow substantially in 2025, with a target of $7 billion, but there are concerns it might fall short of expectations.
• 📉 Some analysts speculate that AMD will struggle to compete with Nvidia due to its focus on hardware and software, while AMD is seen as lagging in innovation.
• 🚨 Intel may pose a threat to AMD’s market share, with new competitive products, including GPUs and CPUs, which could challenge AMD in the upcoming years.
• 💰 Despite the negative sentiment, analysts’ average price target for AMD suggests a 47.2% potential upside from its current stock price.
• 📊 AMD’s price-to-earnings (P/E) ratio and other valuation metrics indicate the stock is undervalued, particularly with a price-to-earnings growth (PEG) ratio under 1.
• 📉 In Q4, AMD missed some key financial metrics, including free cash flow, revenue, and gross profit, but the situation is not disastrous for the company.
• 📈 AMD's data center revenue is expected to be a major driver of growth in 2024 and beyond, with 552% growth since 2020.
• 🖥️ AMD faces slower growth in its client-side business due to the hype around AI PCs, but the real acceleration is expected in 2025 as new applications and hardware come to market.
• 🔍 Analyst commentary highlights concerns over AMD’s ability to meet AI revenue targets and the competitive landscape, especially from Nvidia and custom chips from Broadcom and Marvell.
• 📉 A reverse DCF model shows that to justify AMD's current stock price, the company would need to maintain an annual free cash flow growth rate of 26.9% over the next 10 years.

Q & A

What is the current market cap of AMD and how does it compare to Intel?

AMD currently has a market cap of $22.8 billion, which is more than double Intel’s market cap.

What is the main reason for AMD’s underperformance in 2024?

AMD has experienced over 15% decline year-to-date, with concerns surrounding its ability to meet aggressive AI growth targets and increasing competition from Nvidia and Intel.

What are analysts expecting from AMD’s AI revenue in 2024?

Analysts expect AMD’s AI revenue to surpass $5 billion in 2024, which is a significant increase from nearly nothing a year ago.

What are the concerns regarding AMD’s AI growth in 2025?

There are concerns that AMD might struggle to compete with Nvidia, which offers a more integrated hardware-software solution. Additionally, analysts worry about whether AMD will meet its projected AI revenue targets in 2025.

How is AMD expected to perform in the data center market in 2025?

AMD’s data center revenue has been growing rapidly, up 552% since 2020, and analysts expect it to continue growing strongly in 2025, making it a key driver for the company’s future growth.

What impact does the gaming segment have on AMD’s financial performance?

AMD’s gaming segment has shown slower growth, with some decline observed. This has been dragging down the overall performance of the company, especially as demand for new gaming PCs has slowed.

What are the expectations for the client-side (PC) segment in 2025?

Analysts expect AMD’s client-side segment to recover in 2025, driven by the release of Windows 12 and the potential growth of AI-powered PCs, which should increase demand for new hardware.

What is AMD’s current valuation based on key financial metrics?

AMD is considered undervalued based on a PEG ratio of 0.66, which indicates it is trading below its long-term growth potential. The average analyst price target suggests a 47% upside from its current stock price.

How did AMD perform in the most recent quarter, and what were the concerns?

In the most recent quarter, AMD saw positive revenue growth, but missed on free cash flow and guidance. Analysts were particularly concerned about the company's guidance for 2025 and potential risks in its AI and client revenue segments.

What is the significance of AMD’s free cash flow projections for the next few years?

AMD’s free cash flow is expected to grow significantly, with projections for 2025 showing a 90% increase. This growth is mainly driven by data center revenue, and it indicates strong financial health for AMD going forward.