AMD Reports Strong Q1 Results Amid Market Challenges

Advanced Micro Devices (NASDAQ: AMD) Q1 results and 2025 guidance update sent a wave of relief through the market.

The results surpassed expectations, showcasing resilience despite tariffs and restrictions in China. However, analysts remain cautious.

After the release, there was a trend of price reductions despite highlighting strong results and optimistic core business performance. The bottom line is that Advanced Micro Devices faces headwinds in 2025. Nevertheless, its business appears solid—arguably better positioned than NVIDIA for the long term—and it is relatively inexpensive compared to the long-term forecasts and price targets for 2025.

Long-Term Growth Potential for Advanced Micro Devices

Compared to NVIDIA (NASDAQ: NVDA), Advanced Micro Devices is more diversely positioned for long-term growth. While NVIDIA leads in GPU, AI, and cloud sectors, AMD stands strong as the #2 GPU provider and an increasingly significant player in the CPU market, with exposure to cloud, edge, and endpoint semiconductor segments.

NVIDIA may eventually close the gap, but AMD has made significant strides to enhance its competitiveness in the GPU and AI markets. This includes advancements in software infrastructure and the acquisition of ZT Systems.

ZT Systems specializes in designing, manufacturing, and deploying rack-scale server solutions for hyperscalers and telecoms. This acquisition aligns with AMD’s go-to-market strategy, allowing clients to deploy AMD GPUs on a larger scale. Additionally, a collaboration with Rapt.ai aims to optimize GPU operations effectively.

Rapt.ai’s AI-enabled software focuses on enhancing AMD’s MI300 and future product lines by minimizing compute bottlenecks, maximizing compute efficiency, automating repetitive tasks, and boosting developer productivity for AMD clients.

Analysts Predict 20% Rise for AMD in 2025

Following AMD’s guidance update, some analysts are lowering their price targets. However, there are positive aspects for investors to consider. Several price targets remain intact, and Bank of America upgraded AMD to Buy. The consensus rating is a Moderate Buy, which has strengthened post-release. Current price targets are clustering around $120, indicating a potential 20% upside. Despite subdued sentiment in Q2, the market may see positive surprises later this year.

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Until further updates, the Q1 results and guidance remain strong. Although impacted by events in China, quarterly results exceeded analysts’ expectations reported by MarketBeat. Q1 revenue reached $7.74 billion, a 36% increase year-over-year, performing 430 basis points above the consensus.

Revenue growth is particularly driven by the Data Center and Client segments, with the Data Center seeing a 57% increase and Client up by 28%. Some challenges persist in the Client segment, particularly with Embedded down by 2.7% and Gaming declining by 30%. However, both areas have shown stability over the past year and are expected to rebound by year-end.

Details from the Data Center segment are also promising. Growth is accelerating, with strength noted in both GPU and CPU segments. Looking ahead, guidance suggests revenue growth will remain solid at a robust 26%, even considering the impact from China, while maintaining a double-digit growth trajectory throughout the year.

AMD’s Stock Rebound in Progress with Ongoing Challenges

AMD’s stock price reached its lowest point in early April, but a rebound is already in motion. Support has emerged at the 30-day EMA following the results announcement, positioning the stock for upward movement despite recent analyst target reductions. A significant resistance level to watch in early May is around $103.50. Should the market surpass this point, a climb toward the consensus target of $120 is plausible, signaling important potential for long-term investors.

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