We recently compiled a list of the 10 Best Semiconductor Stocks to Buy for the AI Boom. In this article, we are going to take a look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) stands against the other semiconductor stocks.

More than two years have passed since the proliferation of the disruptive Artificial Intelligence (AI) megatrend, symbolically marked by the launch of OpenAI’s revolutionary product – ChatGPT. Since then, the AI revolution has accelerated rapidly, with 2023 and 2024 seeing a surge in demand for advanced AI applications across industries. This transformation has driven companies to increasingly rely on robust data centers that can support the computational power required by the intelligent algorithms.

In tandem with the rise of AI, the data center sector has experienced substantial growth. The need for larger, more efficient, and scalable data storage and processing capabilities has created a boom in infrastructure investments. Data centers, which house the powerful servers needed for AI workloads, have become critical enablers of this technology’s expansion. This increase in demand for data center capacity is a key factor that has propelled semiconductor stocks, as these centers rely heavily on cutting-edge semiconductors to deliver the speed, efficiency, and power necessary to process vast amounts of data in real time.

Our Methodology

We shortlisted 35 semiconductor stocks using the holdings of iShares’ Semiconductor ETF. Then we merged these stocks with Insider Monkey’s proprietary hedge fund holdings database and identified the 10 most popular hedge fund semiconductor stocks. 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 Holders: 107

Advanced Micro Devices, Inc. (NASDAQ:AMD) designs digital semiconductors for PCs, gaming consoles, data centers, industrial applications, and automotive markets. Known for its expertise in CPUs and GPUs for PCs and data centers, AMD also supplies chips for leading gaming consoles like the Sony PlayStation and Microsoft Xbox. In 2022, AMD acquired Xilinx, a leader in field-programmable gate arrays, to diversify its portfolio and expand opportunities in key markets such as data centers and automotive.

The shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) are down -26% in the last year, but the company shows signs of improving business environment and growth opportunities. AMD currently experiences strong performance in the server CPU and PC markets, driven by its focus on technology leadership, consistent execution, and close collaboration with customers. The company is optimistic about the growth opportunities in the AI market, both in data center GPUs and AI-enabled PCs, while also expecting a gradual recovery in its gaming and embedded segments. AMD laid out a detailed strategy to expand its gross margins through continuous innovation and operational efficiency, and it views itself as a high-performance computing company, open to addressing customer needs across different architectures.

Advanced Micro Devices, Inc. (NASDAQ:AMD) management commented on their explosive data center opportunity, which they expect will fuel the company’s growth until the end of the decade, during the Barclays 22nd Annual Global Technology Conference. Here is what they said:

“Last year, I was here our MI 300x revenue was 0. And so, it’s amazing during this 2024 what we have done as a company from 0 to like going about $5 billion for this 2024. That’s a great success. I think when you look ahead at 2025, we continue to see the continued investment in AI infrastructure build-out that has been ongoing with all our customers, and you guys can see the third-party data also.

Secondly, user case has been increasing dramatically, right? Every week, we see some new use cases in AI, which definitely when you do the influencing, when you have those use cases, you drive return on investment. So, the backdrop of the market continued to be very strong. And for us, the team has been executing extremely well. MI300 ramping successfully and now MI325, we launched literally this quarter, we’ll start to see revenue in the first quarter next year and then MI350 second half next year. So when you look into 2025, we actually have a much stronger product portfolio versus the 2024.”

Overall AMD ranks 4th on our list of the best semiconductor stocks to buy for the AI boom. While we acknowledge the potential of AMD as an investment, 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.

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.