Considering Advanced Micro Devices stock (NASDAQ:AMD) valuation, buying shares now may not seem like the optimal move. However, the company’s positive outlook warrants further evaluation, especially its balance sheet strength. In 2023, AMD’s diverse performance saw notable growth in Data Center revenue, driven by AMD Instinct GPUs and 4th Gen EPYC CPUs, up 38% year-over-year in Q4.
Expectations for Q1 2024 include revenues of around $5.4 billion, with significant growth projected in Data Center GPU revenues to exceed $3.5 billion for the year and a gross margin of approximately 52%.
Wall Streets Sees More Upside for AMD
Advanced Micro Devices stock capitalized on the surge in artificial intelligence adoption, launching its MI300X processor. With an 84% gain, analysts foresee further potential.
Baird analysts reiterated a bullish outlook on AMD, maintaining their buy rating and $200 price target, suggesting a 17% potential upside. While reports indicate a reduction in orders for AMD’s MI300X chips, Baird says it might be due to over-ordering, similar to Nvidia’s (NASDAQ:NVDA) experience. It anticipates a comfortable upside to AMD’s revenue guidance, fueled by the growing demand for generative AI.
Management’s guidance for the first quarter appears conservative. Forecasting flat year-over-year revenue at $5.4 billion underestimates demand for AI.
In addition, AMD’s momentum from sequential to year-over-year growth in Q4 also gives confidence to analysts and investors. AMD is currently among the most undervalued growth stocks, signaling a buy movement for those who want to invest in the company.
Partnership with Blackberry
On April 9, Blackberry (NYSE:BB) announced a partnership with Advanced Micro Devices stock that will enhance the performance and reliability of its robotic systems in different sectors. The collaboration also aims to provide cost-effective platforms to merge Blackberry’s QNX and AMD’s Kria K26 SOM technology.
BlackBerry QNX’s VP of Product & Strategy, Grant Courville, highlighted the partnership’s focus on ensuring consistent precision and responsiveness in critical robotic tasks. This capability is crucial for industries like autonomous mobile robots and surgical robotics.
BlackBerry’s stock rose 5.6% to $3.04 on April 9, while Advanced Micro Devices saw a 0.6% decline. Despite recent bearishness, shares are up nearly 22% for the year.
Expanding Portfolio
AMD introduced the Versal Series Gen 2, its latest adaptive SoC technology, including the Versal AI Edge Series Gen 2 and Versal Prime Series Gen 2. These advancements significantly boost AI-driven embedded systems, offering up to three times higher TOPs-per-watt and up to 10 times more scalar computing. AMD aims to meet the growing demand for AI-enabled embedded applications while addressing power and area constraints.
Versal Series Gen 2 devices find broad application across industries like automotive, aerospace, and healthcare. Subaru Corporation’s adoption of Versal AI Edge Series Gen 2 for their EyeSight system showcases its potential in enhancing vehicle safety.
With FPGA logic for preprocessing, AI inference processors, and Arm CPU cores for postprocessing, these devices streamline design and potentially reduce time-to-market.
Buy AMD Stock in a Heartbeat
Advanced Micro Devices stock has become a significant contender in the AI chip market, driving investor interest. Beyond surface-level enthusiasm, AMD’s potential for substantial growth is evident in CEO Lisa Su’s forecast of a $400 billion AI data center chip market by 2027.
Analysts suggest this projection could triple AMD’s price to the low $500s, making it a compelling investment. I tend to agree, and think this is a stock long-term chip investors should consider adding on any significant dips.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.