Among investment opportunities in the field of artificial intelligence, semiconductor stocks have become the best choice. Nvidia They’ve been the most popular among chip stocks over the past couple of years, and for good reason. The company’s graphics processing units (GPUs) play an important role in the development of generative AI, and it seems companies around the world can’t get enough of what Nvidia has to offer.
Although it remains a solid opportunity at the intersection of semiconductors and AI, I see another stock that looks like a better value right now. Below, I’ll break down the current price action around it Advanced micro devices(NASDAQ:AMD). I’ll explain why I think the company is well positioned for years of strong growth despite tough competition with Nvidia.
The chart below shows price movements between AMD and a number of leading semiconductor stocks as well as… Van Eck Semiconductor Corporation During the past year. Unlike its peers, AMD shares have fallen significantly — and as of January 14, the stock is hovering near a 52-week low.
Given how integral chips are to AI development, what would cause AMD stock to sell off while its rival is seeing overwhelming support from investors?
From what I can gather, the bad vibes surrounding AMD boil down to growth – or the lack thereof. Currently, the company’s top line is growing at a modest 18%. When compared to Nvidia, with its near triple-digit sales growth, it seems disappointing. However, I think investors are missing the forest for the trees.
Image source: Getty Images
While AMD’s overall revenue growth may seem weak when compared to the competition, it’s essential to look at the finer details before jumping to a conclusion. The company divides its revenue into four main categories: data center, client, gaming, and embedded.
Currently, the company’s gaming and embedded segments are not growing at all. Unfortunately, this lack of growth cannibalizes thriving business areas. According to the company’s latest financial report, data center operations grew 122% year over year. Almost identical to that of Nvidia Data center GPU chip.
Despite this impressive growth, AMD is trading at… Price to Earnings to Growth (PEG) Ratio Of just 0.3, this suggests that analysts may be missing how strong the company’s data center business is and are therefore lowering its growth estimates. Note that stocks with a PEG ratio below 1 generally indicate that they are undervalued.
This year is going to be an interesting one for the chip space. Investors and Wall Street analysts will be weighing all the potential statistics surrounding Nvidia’s new Blackwell GPU – which is said to have already sold out over the next 12 months. This is good news for Nvidia on the surface, but I think AMD has a huge opportunity looming in the background.
Specifically, these supply and demand dynamics provide an interesting opportunity for AMD as the company can compete on price and provide the optimal solution when companies simply cannot get their hands on Nvidia GPUs. Such an idea is not unreasonable to buy into either.
A big tailwind for AMD over the past year has been the notable adoption of its MI300 accelerators by super accelerators including oracle, Microsoftand Meta platforms. While each of these companies relies heavily on Nvidia’s GPU architecture as well, they have taken steps to diversify their AI infrastructure by supplementing their Nvidia portfolio with products developed by AMD.
When you take into account that AMD already has a bunch of follow-on chips scheduled for release during 2025 and 2026, I think the company has a good opportunity to capitalize on the ongoing demand shake-up across the semiconductor landscape by offering a number of alternative solutions to Nvidia’s product lineup – all at a price More reasonable.
To me, investors should focus on the growth trends around AMD’s data center GPU segment. If the company can continue to accelerate this specific part of its business profitably, I think it’s only a matter of time before investors start to notice its scale, and shares could start to rise.
I see AMD as a compelling long-term opportunity for AI investors and believe the continued lower price action makes now a profitable time to buy the stock.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco He has positions at Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
