We recently published a list of 12 Cheap AI Stocks to Buy in 2025. In this article, we are going to take a look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) stands against other cheap AI stocks to buy in 2025.

Artificial Intelligence (AI) was a buzzword around Wall Street for most of 2024. AI has shown immense promise but comes with significant risks. Big AI players are dominating the broader market, but there will be opportunities for other companies to explore as the AI market continues to expand. For instance, the new administration is keen on technological advancement, and recently, President Donald Trump announced a $500 billion AI initiative, a joint venture known as Stargate between OpenAI, Softbank, and Oracle.

However, DeepSeek’s introduction shocked the U.S. companies after it released a new AI model, a much better alternative to GPT-4. DeepSeek claims to have designed the AI model in just two months and at around under $6 million using Nvidia’s less-advanced H800 chips, as reported by Reuters on January 27. Since the news broke out, NVIDIA Corporation (NASDAQ:NVDA) shares have plunged over 16%, wiping away $600 billion in market capitalization, the biggest one-day loss in U.S. history.

Moor Insights & Strategy founder, CEO, and chief analyst Patrick Moorhead, speaking to Market Domination, shared his views on DeepSeek. Moorhead was impressed by the efficiency of DeepSeek’s AI. He pointed out that the Chinese have used different techniques compared to American developers, where they were able to parse or train maybe 5% of the data, which is a 95% reduction.

However, Moorhead also addressed the U.S. market drop as an “overreaction.” “I think the market overall should be going crazy because [this is the] uplift of what we were looking for [from AI],” said Moorhead. He added that the investors’ focus should be on the progress in inference.

It might be a good time to invest in AI stocks, especially cheap AI stocks during the market’s overreaction.

Our Methodology

To determine the list of cheap AI stocks, we went through various news articles and stock analyses. We shortlisted the AI stocks with the minimum analyst upside of 30%, as of January 27. Cheap, in the context of this article, means stocks that Wall Street analysts believe are undervalued and will surge to higher share prices. We have ranked the cheap AI stocks to buy based on their popularity among hedge funds, as of Q3 2024, in ascending order.

Why do we care about what hedge funds do? 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)

Analyst Upside (as of January 27): 59%

No. of Hedge Fund Holders: 107

Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA’s counterpart, specializes in manufacturing semiconductors, providing processors, and graphics solutions for gaming, data centers, and embedded systems, with a core focus on high-performance computing using AI use cases.

Where NVDA led the AI boom in 2024, Advanced Micro Devices, Inc. (NASDAQ:AMD) shares plunged over 35% in the last year. Earlier in December 2024, someone asked Jim Cramer if he was worried about AMD and the stock’s underperformance. Here is what Cramer said:

“This is very difficult, and you’re absolutely right to bring it up, and I’m glad you did. Here’s the problem. It is absolutely true—it is absolutely true that they’re not doing as well as Nvidia. It is true that they do not have the big Amazon orders that I’ve been looking at. But can we just remember that Lisa Su has built an amazing company, taking a lot of shares from Intel? She got the number two when it comes to the data center, when it comes to AI, and come on, she just did the great deal where she got all these engineers to come in.

Advanced Micro Devices, Inc. (NASDAQ:AMD) has transformed its business from a struggling company to a semiconductor leader, with its stock jumping from $3 to $115 over a decade, as of January 27. In 2024, AMD introduced the Instinct MI325X AI accelerators and next-generation networking solutions, focusing on strengthening its position in the AI data center market. The company’s majority of revenue comes from data center sales. In 2024, the company acquired ZT Systems for around $5 billion. The ZT Systems purchase will further help Advanced Micro Devices in improving its market share in AI data centers.

During the third quarter of 2024, Advanced Micro Devices, Inc. (NASDAQ:AMD) posted a revenue of $6.82 billion, up by 18% year-over-year and beating estimates by $104.33 million. The data center revenue accounted for $3.5 billion, up 122% year-over-year, driven by significant growth in EPYC CPU and Instinct GPU sales.

On January 21, Citi maintained a Buy rating on AMD shares and lowered the price target from $200 to $175. The firm expects a drop in semiconductor sales due to weaker demand in PC, automotive, and industrial markets. However, analysts project AMD’s data center business to expand, driven by AI sales.

Overall, AMD ranks 4th on our list of cheap AI stocks to buy in 2025. While we acknowledge the potential of AMD to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.