We recently published a list of 10 Trending AI Stocks in October. Since Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 6th on the list, it deserves a deeper look.
Tom Lee, Fundstrat co-founder, while talking to CNBC in a latest program, explained his bullish case for the market and why he believes the S&P 500 is headed to close the year “well beyond” 5,700.
“Bull markets are supported by a strong fundamentals and this is a case where not only has the economy survivie extremely high interest rates but the Fed is beginning to cut rates, and an economy that has been sort of languishing has been China. Now we have stimulus and what looks like some bazooka policies that are supporting that region, and we have a lot of cash on the sidelines. I think this is a formula for stocks to do pretty well the next three to 12 months, and that’s why we think that we would be well beyond 5700 before year-end.”
Lee said that he’s inclined to buy “risks outright” as he believes more upward momentum would come for stocks after the election.
“Small caps still have good fundamentals, earnings growth is accelerating, the media P/E is eleven times which is almost seven turns lower than the S&P so I think there is still case to be made that small-cap are starting a multi-year gain.”
For this article we picked 10 AI stocks that are making big moves on the back of latest news. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
BofA Securities reaffirmed Advanced Micro Devices, Inc. (NASDAQ:AMD) Buy rating ahead of the company’s AI event on October 10.
BofA analysts, led by Vivek Arya, said their top AI picks remain Nvidia (NVDA) and Broadcom (AVGO). However, they maintained AMD’s rating, highlighting the company’s unique potential for CPU market share gains. AMD is well-positioned to take market share in the PC and server CPU sectors from Intel (INTC), which continues to face internal challenges and restructuring efforts.
The analysts also pointed to Advanced Micro Devices, Inc. (NASDAQ:AMD) potential to tap into the growing AI market. AMD estimates the total addressable market for AI accelerators will surpass $400 billion by 2027, a sector where Nvidia currently leads but continues to expand. The expanding market offers opportunities for alternative suppliers like AMD, particularly in the application-specific integrated circuit (ASIC) space.
Arya’s team believes that upcoming AI roadmap updates (including the MI-325/250/400 series) and server CPU advancements (Zen-5-based Turin versus Intel’s Granite Rapids) could reignite investor interest in AMD.
Despite these growth prospects, competition remains fierce. Investors expect AMD’s AI sales to grow another 10% in 2024 to exceed $5 billion, with the potential to double year-over-year to $10 billion in 2025. However, the company still faces stiff competition from Nvidia, which holds over 80% of the AI market, and cost-effective custom ASICs from Broadcom and Marvell Technology (MRVL), which collectively control nearly 10%.
BofA analysts estimate Advanced Micro Devices, Inc. (NASDAQ:AMD) AI accelerator market share will remain at 5-7% for 2024-2026, well below its more than 20% share in consumer CPUs and gaming GPUs. But if AMD can carve out a 10% AI market share by 2026, it could add around $5 billion in sales, bringing potential earnings per share to $8-$9, up from current consensus estimates of $7.37.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
Overall, Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 6th on Insider Monkey’s list titled 10 Trending AI Stocks in October. While we acknowledge the potential of Advanced Micro Devices, Inc. (NASDAQ:AMD), our conviction lies in the belief that 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 is originally published at Insider Monkey.