From Nasdaq: 2025-02-09 12:30:00

The stock market saw a surge in technology stocks at the start of 2025, driven by the AI narrative. However, a Chinese start-up called DeepSeek released a competitive AI model, causing a decline in tech stocks. AMD’s stock fell by 10% as DeepSeek claimed to have built its AI at a fraction of the cost of U.S. counterparts.

AMD’s forward P/E ratio of 25.6 is consistent with levels from September 2023, but its market capitalization has grown by $30 billion. The company’s data center business saw a 94% growth in 2024, showing significant operating leverage. Analysts are modeling continued growth in data centers while predicting deceleration in gaming and embedded units.

With AMD’s data center business growing, the company’s valuation is seen as undervalued compared to Nvidia. Analysts are predicting a rise in future earnings but are balancing it with deceleration in other segments. This presents an opportunity to invest in AMD at a discounted price compared to its potential in the data center realm.

Former Facebook director Randi Zuckerberg is a member of The Motley Fool’s board. The Motley Fool recommends and has positions in AMD, Meta Platforms, Microsoft, and Nvidia. The Motley Fool also recommends investing in specific stocks with high returns like Nvidia, Apple, and Netflix. The author’s views are independent and do not represent those of Nasdaq, Inc.



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