There’s no denying that Advanced Micro Devices (NASDAQ:AMD) is a strong competitor among artificial intelligence chip makers. On the other hand, the company’s future growth and success may already be factored into the AMD share price. Therefore, we’re assigning a “B” grade to AMD stock with a cautiously optimistic outlook.
If you’re seeking exposure to the high-conviction AI hardware market, investing in AMD isn’t a bad choice. Just monitor AMD’s financial and operational performance as the company has the challenging task of delivering on high expectations.
AMD’s Big AI Chip Industry Forecast
Not long ago, AMD announced the availability of its Instinct MI300X accelerators. These accelerators can handle the power-intensive requirements of AI workloads.
Without a doubt, AMD will make waves in the AI processor industry with the MI300X model. According to AMD President Victor Peng, the company’s “Instinct MI300 Series accelerators are designed with our most advanced technologies, delivering leadership performance.” In addition, Peng stated these accelerators will be used “in large scale cloud and enterprise deployments.”
AMD’s management is quite confident in the company’s growth prospects as an AI-compatible processor provider. Recently, per Bloobmerg, AMD CEO Lisa Su predicted the AI chip industry could exceed $400 billion “in the next four years.”
According to Reuters, Su assured that AMD has a “significant” supply of AI chips with a combined value “well above” $2 billion. Consequently, it’s fine to hold some AMD shares if you’re on board with AMD’s ambitious outlook for the AI-processor market.
Don’t Assume a Repeat Performance With AMD Stock
Momentum-focused traders might be glad to see AMD stock shooting higher in 2023. Impressively, the stock doubled from $64 at the beginning of the year to $128 in early December.
Investors are thinking ahead and have already factored their assumptions about AMD’s future growth prospects as as premier AI chip maker. If you believe that the market is highly efficient, then you might conclude that AMD is “fully priced.”
There’s already a lot of optimism in the market and some of it comes directly from AMD’s management. For example, AMD recently increased its total addressable market estimate for the company’s data center AI processors from $30 billion to $45 billion.
That’s a 50% increase, and again, it indicates AMD’s overwhelming confidence. Meanwhile, AMD seems unstoppable, but value-focused investors might be wary. After all, AMD’s trailing 12-month price-to-earnings ratio recently topped 1,000x. So, be sure to consider this if you’re deciding whether to jump into an investment in AMD.
Plan Your AMD Stock Strategy With Patience
Remember, you don’t have to invest in AMD all at once. If you’re concerned about a correction to the downside, you can just buy a few AMD shares now. You also could hold some cash to buy more shares later at a lower price.
This is the strategy of “scaling into” a stock, and it makes sense if you’re cautiously optimistic about AMD. But of course, you have to decide what you want to buy and when, based on your portfolio. AMD stock earns a “B” grade and should generally be appropriate for a moderately sized share position.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.