6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 96
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor company. The company’s strategy of aiming high-volume AI workloads can yield benefits in the long run. With AI applications becoming more widespread and diverse, there can be increased demand for cost-effective solutions balancing performance and efficiency. Furthermore, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s strength remains in its ability to compete throughout multiple segments of the broader semiconductor market. The company has been gaining market share in traditional CPU markets for servers and client devices.
In FY 2025, Advanced Micro Devices, Inc. (NASDAQ:AMD) continues to see clear growth opportunities based on its strength of product portfolio and growing demand for high-performance and adaptive computing. On April 15, the company completed its initial assessment of a new license requirement implemented by the US government for exporting certain semiconductor products to China (which includes Hong Kong and Macau) and D:5 countries, or to companies headquartered or with an ultimate parent in such countries. The Export Control applies to its MI308 products.
Furthermore, Advanced Micro Devices, Inc. (NASDAQ:AMD) anticipates that the Export Control might result in charges of up to ~$800 million in inventory, purchase commitments, and related reserves. However, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s growth prospects seem to be strong, mainly in the AI and data center markets. Its emphasis on developing competitive AI accelerators and enhancing presence in high-performance computing places it well for future growth. Artisan Partners, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Among our top detractors were Advanced Micro Devices, Inc. (NASDAQ:AMD), Novo Nordisk and Danaher. Shares of AMD declined in Q4, which capped off a frustrating year of stock performance that did not seem to match its fundamental progress. Regarding its AI opportunity, the company accomplished everything we had hoped for over the past 18 months. It successfully entered the market with its MI300 graphic processing unit (GPU) chip and raised its latest 2024 AI-related revenue guidance to $5.0 billion from $4.5 billion. However, its shares have experienced weakness for two primary reasons. First is the emergence of custom AI accelerator chip solutions from Broadcom and Marvell (a Q4 buy) as alternatives to the GPU solutions from NVIDIA and AMD. While this competitive threat is more significant than we had initially anticipated, we continue to be excited about AMD’s opportunity moving forward. We believe the AI-related market will grow to $400 billion–$500 billion in the next three years (compared to $100 billion in 2024). We expect that NVIDIA’s market share will fall from ~90%in2024to60%–80%overthesameperiodasitcedes market share to AMD (from5%in2024to10%–20%) and custom accelerator solutions (from 5% in 2024 to 10%–20%). Under these assumptions, we expect AI GPUs to double AMD’s total 2024 sales. Second is cyclical struggles within other areas of its business. While data center revenues have more than doubled over the past two years, the gaming business is down more than 60%, and embedded (specialized chips found in various industrial and consumer products) is down20%.As its data center business continues to grow and the cyclical areas of its business bounce back, we expect AMD to deliver stronger earnings growth.”
