Investors cautious on AI industry; AMD shares drop 32%

From Nasdaq: 2024-11-06 08:39:00

Investors are becoming more selective in the generative AI industry, with Advanced Micro Devices (AMD) shares plummeting by 32% from their high of $211 in March. AMD’s trailing P/E ratio is now 126, double Nvidia’s and almost five times the S&P 500 average. Third-quarter revenue increased by 18% to $6.8 billion, with net income up 191% to $771 million.

AMD’s exposure to the AI chip industry through its data center segment is around 51%, compared to Nvidia’s 88%. While AMD’s net income grew by 191% to $771 million, adjusted net income only increased by 33% to $1.5 billion. AMD faces competition from Nvidia in the AI hardware market, but its recent acquisition of ZT Systems could boost its position.

Despite its recent stock price declines, AMD may offer better value now. While explosive returns may not be expected in the short term, AMD shares have the potential for market-beating growth in the long run. It might be wise to wait and observe before considering investing in AMD.

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Author Will Ebiefung has no position in the mentioned stocks. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The views expressed in the article are those of the author and do not necessarily reflect those of Nasdaq, Inc.



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