We came across a bullish thesis on Advanced Micro Devices, Inc. (NASDAQ:AMD) on Substack by Oguz Erkan. In this article, we will summarize the bulls’ thesis on AMD. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s share was trading at $125.37 as of Jan 3rd. AMD’s trailing and forward P/E were 110.95 and 25.19 respectively according to Yahoo Finance.
A technician operating a robotic arm on a production line of semiconductor chips.
AMD’s remarkable transformation reflects its strategic focus, managerial excellence, and innovative adaptability, positioning it as a formidable player in the fiercely competitive semiconductor market. With exceptional returns on invested capital and an innovative edge, AMD has carved out a durable competitive advantage. Its adoption of chiplet architecture has revolutionized chip design, allowing for modular integration of components like processing cores and memory controllers. This approach reduces development cycles, enhances flexibility, and optimizes manufacturing costs, yielding efficiencies that give AMD an economic edge over competitors like Intel. By achieving yields exceeding 80%, compared to Intel’s 60%, AMD has redefined industry dynamics, with its chiplet innovations now extending to GPUs for AI inference workloads.
Intel’s failure to anticipate the transformative potential of chiplets and its reliance on monolithic designs has allowed AMD to leap ahead. AMD’s MI300A and MI300X chips, which integrate CPU and GPU cores, position it as a leader in AI inference, a critical growth area as demand shifts from training to real-time application. Nvidia’s challenges with monolithic architectures and manufacturing delays validate AMD’s strategic pivot, further solidifying its competitive position. The synergy between AMD’s CPU and GPU technologies enables it to address diverse market segments effectively, strengthening its foothold in emerging fields like AI accelerators and data center applications.
Under Lisa Su’s leadership, AMD has focused on high-margin server CPUs and outsourced manufacturing to TSMC, prioritizing advanced design while leveraging TSMC’s superior foundry technology. This strategy drove AMD’s server market share from near zero in 2016 to 23.6% by 2022, with revenue share climbing to 33.9%. AMD is now eroding Nvidia’s dominance in data center GPUs, capturing significant market share as Nvidia’s growth plateaus. With a projected $1 trillion market opportunity spanning AI chips, data center CPUs, and other semiconductor applications, AMD’s potential for sustained growth is immense. Despite lacking a durable competitive advantage in the traditional sense, AMD’s adaptability and innovation position it to capitalize on this expansive market.
Assuming 20% annual revenue growth, AMD could reach $60 billion in revenue by 2030, translating to a valuation of $450 billion—a 2.5x return from current levels. As the industry transitions to modular architectures, AMD’s leadership in chiplet design will continue to drive performance and profitability, ensuring its position at the forefront of technological advancement. The company’s evolution is a testament to strategic focus, adaptability, and innovation, offering investors compelling long-term potential.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 107 hedge fund portfolios held AMD at the end of the third quarter which was 108 in the previous quarter. While we acknowledge the risk and potential of AMD as an investment, 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. This article was originally published at Insider Monkey.