We recently compiled a list of the 12 Best S&P 500 Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) stands against the other S&P 500 stocks.

2024 was a memorable year for the broad market index, which posted a gain of 23.31%, building on the 24.2% return in 2023. The two-year surge of over 53% is the best performance for the index since the 66% rally between 1997 and 1998.

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The stock market benefited from a resilient economy that avoided recession, declining interest rates, and waning inflation. Analysts are projecting continued growth in 2025 amid strong economic data and optimism about a business-friendly Trump administration returning to power.

The broader market rose 0.5% on January 23, going past its peak in December to a new record high. The gain added to the week-long winning momentum after data showed inflation slowing in the country more than economists had anticipated. With this rise, the index is up 4% since the start of the year.

Investor sentiment has also been bolstered with President Trump reiterating his commitment to lowering oil prices and further cutting interest rates. The 78-year-old is also taking his time over tariffs by holding them off until February. Analysts believe a less aggressive approach than some had expected has helped the market move higher. Here is what Larry Tentarelli, chief technical strategist at the Blue Chip Daily Trend Report, had to say:

“He really can’t control interest rates, but the market likes to hear that kind of stuff. So far, the market does seem to like what Trump’s policies are going to be, so we’ll just have to see if there’s some follow-through.”

A string of strong corporate earnings reports has also supported the gains in January. According to data from FactSet, earnings for companies listed on the index are on track to grow by over 12% for the fourth quarter compared to the same period in the prior year. If that happens, this would mark the best quarter for company profits since 2021.

While the overall outlook for the stock market looks encouraging, analysts are also cautious about the rally having gone too far, and a correction is in the offing this year. The threat of fierce trade wars sparked by tariffs, ongoing geopolitical conflicts, and broader inflationary pressures could also hurt the market.

Jurrien Timmer, Director of Global Macro for Fidelity Management & Research Company wrote the following in a note on December 18.

“Personally, I am bullish on stocks for 2025, though with valuations high and the bull market maturing, I don’t think investors should expect quite such spectacular returns next year as we have seen this past year. And I think there are important risks from inflation, and the market’s concentration, to be aware of.”

Methodology

For this article, we went through the list of large cap stocks on the broader market index and picked the top 12 with the highest average share price upside potential. All data is as of the close of the day on Friday, January 31, 2025. The stocks are listed in ascending order of their share price upside potential.

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)

Average Share Price Upside Potential as of January 31: 51.52%

Market Cap: $188.17 billion

Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the world’s leading computer processors and related technologies manufacturers. Its main products include microprocessors, graphic processors, personal computers, workstations, and embedded system applications. The company has also recently expanded to new markets such as high-performance computing and data centers.

In January this year, AMD announced that its Ryzen AI PRO processors will power the new Dell Pro devices, offering improved efficiency, privacy, personalization, and connectivity, as the most recent generation of these processors are designed to enhance business productivity with Copilot+ features. This marked a significant milestone in the partnership between the two companies.

During Q3 2024, Advanced Micro Devices, Inc. (NASDAQ:AMD) generated a record $6.8 billion in revenue, up 18% from last year, driven by higher data center and client processor sales. It also expanded its gross margin by 2.5 percentage points and increased its EPS by 31% year-over-year.

AMD boasts major clients for its MI 300X accelerators, such as Microsoft and Meta. It is set to benefit ahead as more companies ramp up the development of data centers for AI. While DeepSeek sparked a massive AI stock selloff on January 27, AMD’s share price fell by only 6.4%, compared to double-digit losses by its peers. This has led to chatter about Advanced Micro Devices, Inc. (NASDAQ:AMD) being the biggest winner from the bloodbath.

Wall Street analysts see great potential in AMD and expect it to benefit from increased demand for its AI accelerators, which offer competitive pricing compared to its rivals. It is one of the best large-cap stocks to invest in according to analysts, with a consensus Buy rating and an average share price upside potential of 51.52%.

Overall AMD ranks 8th on our list of the best S&P 500 stocks to invest in according to analysts. 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 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.

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