Artificial Intelligence (AI) owes much of its development to the gaming industry, which initially influenced major chipmakers like Nvidia and Advanced Micro Devices (AMD). AMD’s gaming segment once contributed over a quarter of revenue but now only makes up 10%. However, innovations like Valve’s new Steam Machine powered by AMD’s technology show promise for the company’s future.
Despite the gaming industry’s cyclical nature, AMD continues to innovate with its RDNA 3 semi-custom GPU and Zen 4 CPU featured in the upcoming Steam Machine. While this may not significantly impact AMD stock, it enhances brand visibility and diversification, crucial for surviving industry downturns. AMD’s focus remains on high-margin AI accelerators and data centers.
AMD, based in Santa Clara, California, specializes in semiconductor chips, primarily CPUs and GPUs for data centers, gaming equipment, and embedded systems. The company’s stock has surged nearly 80% in the last year, outperforming the S&P 500. Partnerships like OpenAI have contributed to this growth, with consistent deals in the AI sector.
AMD’s valuation remains high compared to the broader market, with a forward P/E multiple of 102.88x. Despite this, AMD has always commanded high multiples as a leading chipmaker, with its current multiple only slightly higher than its 5-year average. The company’s recent Q3 earnings beat Wall Street estimates, reporting strong top-line growth year-over-year.
AMD’s partnership with OpenAI and Oracle’s deployment of AMD chips in 2026 are poised to drive AI revenue. While the Steam Machine collaboration may not be a game-changer for earnings calls, it solidifies AMD’s reputation as an innovator. Analysts remain bullish on AMD, with a $290 price target and expectations for further growth pending details on AI product gross margins.
Jabran Kundi has no positions in the securities mentioned. The information in this article is for informational purposes only. Original article published on Barchart.com.
Read more at Yahoo Finance: AMD Is Powering the New Steam Machine. Will It Move the Needle for AMD Stock?