Unlocking the Power of Artificial Intelligence: A Hidden Gem in the Making
The artificial intelligence (AI) revolution is transforming industries and creating new opportunities for investors. One stock that has been making waves in the AI space is SoundHound AI, with a staggering 936% gain in 2024. However, its valuation has become expensive, trading at 109 times sales. For investors looking to tap into the AI boom without breaking the bank, Advanced Micro Devices (AMD) presents a compelling alternative.
A Glimpse into AMD’s AI Ambitions
AMD’s stock has underperformed the market in the past year, but its AI chip business is showing promising signs. The company’s data center revenue surged 122% year over year in the third quarter of 2024, driven by growing sales of its AI graphics processing units (GPUs) and server processors. AMD’s data center GPU sales forecast has consistently increased throughout 2024, indicating traction in the market.
A Brighter Future Ahead
AMD’s CEO, Lisa Su, expects significant growth in the company’s AI chip supply for 2025, driven by strong demand and an improving supply chain. The company’s foundry partner, Taiwan Semiconductor Manufacturing, is set to double its advanced chip packaging capacity by the end of 2025, which could lead to a substantial increase in AMD’s AI chip production.
Capitalizing on the AI Accelerator Market
The AI accelerator market is projected to reach $500 billion in revenue by 2028. Even if AMD secures a 10% share of this market, its data center GPU revenue could grow tenfold from 2024 levels. Additionally, the personal computer (PC) market is expected to drive further growth, with global AI PC shipments forecasted to jump to 114 million units in 2025.
Analysts Expect a Robust Turnaround
Analysts are forecasting a 13% increase in AMD’s revenue in 2024, along with a 26% jump in earnings per share. The company’s stock is currently trading at 25 times forward earnings, a discount to the tech-laden Nasdaq-100 index’s earnings multiple. Assuming AMD trades at 30 times earnings after a year and achieves $5.10 per share in earnings in 2025, its stock price could jump to $153, representing a 25% increase from current levels.
Don’t Miss Out on This AI Opportunity
Investors looking to tap into the AI boom without overpaying should consider AMD. With its growing presence in the AI chip market, improving supply chain, and robust growth prospects, AMD presents a compelling alternative to expensively valued stocks like SoundHound AI.
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