AMD Set to Reveal Key Earnings Amidst AI Competition
As the new quarterly earnings season begins, Wall Street’s eyes are on companies dominating the artificial intelligence (AI) market, particularly Advanced Micro Devices (NASDAQ: AMD). The firm will unveil its fourth-quarter results for 2024 on Tuesday, February 4, and the anticipation is palpable as investors await updates on its competitiveness against Nvidia.
AMD’s Strategy to Challenge Nvidia’s Dominance
At the close of 2023, AMD introduced its MI300X data center GPU, seeking to claim a share of Nvidia’s remarkable 98% market dominance. Notably, this new product attracted several major clients, including Microsoft, Meta Platforms, and Oracle, thanks to its superior performance and cost efficiency compared to Nvidia’s flagship H100.
More recently, AMD unveiled the MI325X, designed to rival Nvidia’s H200. The company is also gearing up to ship the MI350 series later this year, which will utilize the new CDNA (Compute DNA) 4 architecture. This advancement promises to deliver 35 times the performance of the previous MI300X model, putting it in direct competition with Nvidia’s leading Blackwell architecture in AI technology.
Interestingly, AMD is also the top supplier of AI chips for personal computers, a sector where Nvidia has yet to establish a foothold. The trend is shifting towards integrating AI directly into everyday devices, leading to faster and more efficient performance for users.
With new AI models from developers like DeepSeek enhancing efficiency significantly, AMD’s management reports that manufacturers such as HP, Lenovo, and Asus will launch over 100 computing platforms equipped with its Ryzen AI 300 Series chips this year. Anticipation surrounding this sector is expected to build ahead of the earnings report.
Key Figures to Monitor During Earnings Release
Analysts will closely scrutinize AMD’s data center revenue, which is now its primary income source. In the third quarter of 2024, this segment generated a record $3.5 billion—an impressive 122% increase year-over-year—largely due to strong GPU sales.
CEO Lisa Su’s initial revenue forecast for GPU sales was $2 billion for 2024, but by the third quarter, projections surged to $5 billion due to consistently exceeding expectations. A surpassing of this threshold could indicate AMD’s improving competitive stance against Nvidia, making it a critical statistic to watch in the upcoming report.
Another significant point of interest will be AMD’s guidance for GPU sales in 2025. Investors will be eager for growth indications beyond the previous year, particularly since the near-term direction of AMD stock may depend heavily on Su’s insights regarding this figure.
A closer look at AMD’s gaming segment reveals challenges; revenues plummeted by 58% in the first three quarters of 2024, largely due to weakening demand for popular consoles like Sony’s PlayStation 5 and Microsoft‘s Xbox. Nonetheless, with new GPUs rolling out for PC gamers early this year, an upswing in gaming revenue could be on the horizon, making this another area to watch.
Current Valuation: Is AMD a Smart Investment?
Currently, AMD’s trailing 12-month non-GAAP earnings per share (EPS) stands at $3, giving the stock a price-to-earnings (P/E) ratio of 39.1. This is a 17% discount compared to Nvidia’s P/E ratio of 47.1, suggesting AMD stock may be undervalued relative to its competitor.
Looking ahead, analysts predict that AMD’s EPS could rise by 54% to $5.13 in 2025, resulting in a preferable forward P/E ratio of just 22.8. This aligns with AMD’s continued growth potential as it navigates the shifting dynamics of the AI industry.
To maintain its current P/E ratio, AMD’s stock would need to rise an astonishing 71% over the next year, but this does not account for potential earnings growth beyond expectations, which could further boost its stock price.
Returning to the pivotal question: Is AMD stock worth purchasing ahead of the February 4 report? Given its vast opportunities in both data center operations and personal computing, AMD may be a strong addition for long-term investors with a five-year outlook.
Should You Invest $1,000 in AMD Today?
However, prospective investors should consider this crucial point:
The Motley Fool Stock Advisor team recently identified ten top stocks to invest in, and notably, Advanced Micro Devices was not included. The recommended stocks have promising potential for significant returns in the years ahead.
Reflecting on Nvidia’s inclusion on April 15, 2005, if you had invested $1,000 then, you would now own $758,099.
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Randi Zuckerberg, a former Facebook marketing director and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board. Anthony Di Pizio holds no positions in mentioned stocks. The Motley Fool endorses and has investments in Advanced Micro Devices, HP, Meta Platforms, Microsoft, Nvidia, and Oracle, and recommends specific options on Microsoft. For more details, see The Motley Fool’s policies.
The views and opinions presented in this article belong to the author and do not necessarily reflect those of Nasdaq, Inc.
