1) Advanced Micro Devices, Inc. (NASDAQ:AMD)
% Decline In 1 Year: ~36.7%
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor company worldwide. The company’s stock has witnessed a decline of ~36.7% over the past year as investors are concerned about its competitive positioning. While to improve its share in the broader market it can elevate its spending levels, this might weigh over its margins and bottom line. Furthermore, there are concerns about its ability to be at par with Nvidia. However, Advanced Micro Devices, Inc. (NASDAQ:AMD) has released strong Q4 results, with healthy growth in client and data center revenue and a recovery in gaming revenue, says Morningstar.
The firm expects Advanced Micro Devices, Inc. (NASDAQ:AMD) to achieve a top-line CAGR of 17% from 2025 to 2029. It has modeled 28% growth in 2025 and 14% average annual growth from 2026 to 2029 as the company’s data center GPU business takes off in the AI applications. Furthermore, Advanced Micro Devices, Inc. (NASDAQ:AMD) managed to gain market share in the PC CPU market, with Intel’s manufacturing prowess witnessing numerous challenges.
Elsewhere, Wells Fargo analyst Aaron Rakers is bullish as the analyst believes that Advanced Micro Devices, Inc. (NASDAQ:AMD)’s stock is currently trading near relative valuation lows and provides strong risk-reward looking ahead into mid-2025. The analyst has pointed out the company’s ability to continue to fuel further EPYC server CPU share gains. White Falcon Capital Management, an investment fund manager, released its Q4 2024 investor letter. Here is what the fund said:
“During the year, we sold half of our stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD) and Nu Holdings as they reached their intrinsic values. However, the decline in these stocks toward the end of the year provided us with an opportunity to add to our positions. In AMD’s case, the market has been disappointed by the company’s potential shortfall in AI chip revenues, which were previously forecasted to reach $10 billion in 2025. However, the factors required to justify the investment when the stock is priced at $220 per share are vastly different from those needed when the stock is at $120 per share. Yes, AMD’s AI chips and associated software are not competitive with Nvidia but this is now known and in the valuation. We believe this hyperfocus on AI ignores AMD’s other businesses where they continue to take advantage of Intel’s missteps. Importantly, AMD retains the potential to capture a small share of the AI chip market, which, given the market’s massive size, could be highly impactful for the company.”
While we acknowledge the potential of AMD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
