Amazon’s Strategic Move: Investing in AMD for AI Progress

Each quarter, investors gain insights into which stocks prominent investors are trading via the Form 13F, a document required by the Securities and Exchange Commission (SEC). This filing provides a detailed account of what large money managers, including hedge funds and banks, have bought and sold in the previous quarter.

Moreover, corporations must also issue 13F filings if they hold positions in public companies. This article examines Amazon’s recent investments and their potential implications for Nvidia in the long term.

Amazon’s Next Big AI Investment?

In its latest 13F filing, Amazon disclosed stakes in nine public companies. Among its long-term investments are Rivian Automotive, an electric vehicle manufacturer, and Marvell Technology, a semiconductor company. Notably, during the first quarter, Amazon began a position in Advanced Micro Devices (NASDAQ: AMD), acquiring 822,234 shares valued at approximately $84 million.

Why is Amazon Eyeing AMD?

Recently, Amazon has invested $8 billion in Anthropic, an artificial intelligence startup that utilizes Amazon Web Services (AWS) to train its generative AI models. Anthropic relies on Amazon’s custom silicon chips known as Trainium and Inferentia.

This partnership has bolstered AWS, driving revenue growth and improving operating margins. As a result, Amazon’s AI investments exhibit strong unit economics, giving the company financial flexibility to pursue additional AI initiatives. Thus, the investment in AMD is significant. Amazon currently combines its custom chips with Nvidia’s GPU architecture.

Image source: Getty Images.

With this investment, Amazon may aim to enhance its chip stack and reduce dependency on Nvidia. As Amazon focuses on expanding its AI infrastructure through data center developments, AMD stands to become a key player, potentially challenging Nvidia’s market share.

Is AMD Stock Worth Considering Now?

Currently, AMD’s forward price-to-earnings (P/E) ratio is 29, while the average for the S&P 500 is around 20. This difference indicates that AMD may appear overpriced. However, the trend shows that AMD’s forward P/E has decreased over the past year, suggesting that investor confidence in the company’s growth is wavering.

Recent gains in AMD’s data center GPU business, along with new customers like Meta Platforms, Microsoft, and Oracle—who have traditionally relied on Nvidia—underscore a shift towards AMD as a competitive alternative.

As AMD plans to launch new GPU architectures later this year, its stock could be more attractively priced than current investor expectations reflect.

Amazon’s recent investment further solidifies AMD’s credibility. It is plausible that AMD may play an essential role in Amazon’s AI infrastructure strategy.

Given these factors, AMD stock may present a valuable buying opportunity. Its future outlook could be stronger than Nvidia’s, especially as Nvidia faces challenges like custom silicon and new AMD designs.

Should You Invest $1,000 in AMD Now?

Before purchasing shares of Advanced Micro Devices, it’s essential to consider the following:

The analyst team has identified ten top stocks to buy now, and Advanced Micro Devices is not included. The selected stocks have the potential to deliver significant returns in the coming years.

Consider the past performance of stocks like Netflix and Nvidia when they were featured on our list, leading to substantial gains for early investors.

John Mackey, former CEO of Whole Foods Market, is involved with The Motley Fool. Other board members have affiliations with well-known tech companies. The Motley Fool recommends AMD, Amazon, and others mentioned.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.