After a sharp rebound in 2023, capital markets have been red hot this year – with Standard & Poor’s 500 and Nasdaq Composite Its shares had gained 24% and 30%, respectively, as of the market close on December 20.
Of course, the hottest investment topic of the year — artificial intelligence — has remained unchanged since 2023. And in the AI space, semiconductor stocks have generated some of the most lucrative returns over the past two years.
But there’s one stock that doesn’t seem to be attracting investors Nvidiamain competitor, Advanced micro devices (NASDAQ:AMD). As of this writing, AMD shares are down 19% this year. When compared to Nvidia’s 172% return, investing in AMD looks like a tough sell.
Below, I will detail some of the factors affecting AMD’s price movement and assess whether now is a good opportunity to buy the dip in AMD stock because… It is trading near a 52-week low.
In late October, AMD announced its third-quarter financial results. The company’s revenue of just $6.8 billion represents an 18% increase year over year. Although this may seem mundane compared to other types of AI, I encourage investors to look a little deeper.
AMD categorizes revenue into four main categories: data center, client, gaming, and embedded. During the third quarter, AMD’s gaming and embedded segments declined by 69% and 25%, respectively, year over year. On the other hand, the company’s customer segment rose by 29% while its data center business rose by 122% year-on-year.
With such a large disparity between its various businesses, AMD’s overall revenue growth of 18% seems more reasonable. Furthermore, one aspect that I think will be overlooked is that AMD’s data center business is growing at a pace commensurate with Nvidia’s business. This is not a dynamic I would rule out, and below I will explain in detail why.
Nvidia’s biggest advantage in the AI arms race may not be its technological capabilities. Instead, for the better part of the year, Nvidia had no competition in the graphics processing unit (GPU) market. This leadership advantage has allowed Nvidia to achieve enormous levels of pricing power as demand for chip tools rises steadily in the wake of increased investment in generative AI.
However, it is clear that AMD’s entry into the data center GPU market is starting to pay off. both of them Microsoft and Meta platformswhich are well-known customers of Nvidia, also supplement their chipset with AMD’s MI300 accelerators.
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