15 Best Hardware Stocks According To Goldman Sachs

12. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Shareholders In Q1 2024: 124

Advanced Micro Devices, Inc. (NASDAQ:AMD) is the well known computer processor and graphics card company. However, despite its rapid growth and a diverse portfolio for AI, Morgan Stanley was out with a worrying note in June 2024. In the note, the bank downgraded Advanced Micro Devices, Inc. (NASDAQ:AMD)’s shares to Equalweight from Overweight and ascribed a $176 share price target. Morgan Stanley believes that the competition in the high end AI accelerator market is tough particularly due to strong products from NVIDIA. This has led it to conclude that any market that Advanced Micro Devices, Inc. (NASDAQ:AMD) can capture is reflected in the stock, and the shares might not be fast growers in the future.

When it comes to the forward P/E, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s ratio of 46.95 is more than double the market’s ratio. This implies investor expectations of a faster growth when compared to the market. Meridian Funds was quite optimistic in its Q4 2023 investor letter too, where it shared:

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 share 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 impBroadcom Inc. (NASDAQ:AVGO)’s roved 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.