From Nasdaq: 2024-05-06 20:44:57

In the first quarter, Advanced Micro Devices (AMD) met earnings expectations and posted $5.48 billion in sales, a 2.2% increase from last year. Despite strong AI-related revenue growth, AMD stock fell by 11.9% in the last three months, facing tough competition from Nvidia in the AI space.

AMD reported an 80% increase in Data Center revenue, driven by the MI300 AI accelerator, competing with Nvidia’s H100 chip. CEO Dr. Lisa Su highlighted growing AI demand, leading the company to enhance its Data Center business. Q2 revenue guidance ranges from $5.4 billion to $6 billion.

Although AMD showed promising statistics and AI growth, lower revenue in the Gaming and Embedded segment caused a 11% sequential decline. With Nvidia dominating the AI hardware market, AMD needs to step up its game to compete effectively. The AI industry may be overhyped, posing risks to AMD stock.

If AI technology fails to meet expectations, AMD will need its other business units to offset potential losses. Analysts forecast Fiscal 2024 revenue of $23.88 billion, but concerns arise if AI underperforms. With a high valuation multiple of 10.4x trailing-year revenue, AMD stock could face a valuation adjustment if the AI industry struggles.

Wall Street analysts have a Strong Buy consensus on AMD stock, with a price target of $192.83, suggesting a 23.8% upside potential. However, amid challenges from Nvidia and AI uncertainties, investors need to consider the risks associated with investing in AMD stock.



Read more at Nasdaq: AMD Stock: Investors Needed More Than Just a Solid Quarter