1. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Shareholders In Q1 2024: 124
CEO: Dr. Lisa T. Su Ph.D.
Advanced Micro Devices, Inc. (NASDAQ:AMD)’s CEO Dr. Lisa Su is widely heralded as one of the most successful executives in the semiconductor industry. Under her leadership, AMD has transformed itself from a loss making entity to a profitable company that competes with Intel on the back of product design and cost advantages. Like Intel, Advanced Micro Devices, Inc. (NASDAQ:AMD) is also targeting the AI industry with a diversified product portfolio. Susquehanna is also quite optimistic for Advanced Micro Devices, Inc. (NASDAQ:AMD), as it raised the firm’s share price target to $200 from $185 in June 2024 and kept a Positive rating on the shares. The firm shared that Advanced Micro Devices, Inc. (NASDAQ:AMD) has gained market share in the PC and data center markets, and that it can continue to benefit from Intel’s manufacturing woes.
A classic growth stock, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s forward price to earnings ratio of 46.73 is more than twice the market’s 21. This implies that investors continue to expect it to outpace the market in growth. Meridian Funds mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2023 investor letter and shared:
Advanced Micro Devices, Inc. is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hishare versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.
While we acknowledge the potential of AMD as an AI play, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an 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.
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Disclosure: None.
