AMD stock has dropped 30% from its peak despite optimistic AI chip sales outlook.
From Barchart: 2024-05-18 13:30:00
Shares of Advanced Micro Devices (NASDAQ: AMD) surged earlier in 2024 on optimistic commentary about AI sales from management. However, the stock has since dropped about 30% from its peak. Is now the time to buy the dip? AMD’s AI chip sales were initially projected to reach $2 billion, then raised to $3.5 billion. The MI300 accelerated-computing system quickly ramped up to $1 billion in revenue in just two quarters. Yet, during the first-quarter update, the $3.5 billion outlook for 2024 AI sales wasn’t raised again. At the midpoint of guidance, second-quarter revenue is expected to be $5.7 billion, up 4% from the prior quarter and 6% from the previous year. Despite the excitement around AMD’s AI chip sales, there are concerns about whether data-center revenue can follow Nvidia’s trajectory.CEO Lisa Su had become increasingly optimistic about AMD’s AI chip sales at the start of 2024. Initially projecting $2 billion in accelerated-computing sales, this outlook was raised to $3.5 billion in January. The new MI300 accelerated-computing system quickly reached $1 billion in revenue. However, during the first-quarter update, the $3.5 billion AI sales outlook for 2024 wasn’t raised again. Second-quarter revenue is projected to be $5.7 billion, up 4% from the prior quarter and 6% from the previous year. Data-center revenue growth at AMD isn’t matching the sizzle seen in other parts of the business.And while data-center revenue growth at AMD hasn’t been as robust as other segments like gaming and embedded, it is contributing to profit-margin expansion. Operating margins improved to 23% in the first quarter, compared to just 11% the previous year. Despite a way to go to return to peak profitability levels in 2022, AMD could still offer value at 46 times forward PE ratio. The recent dip in AMD’s stock may present opportunity for investors, but caution should be exercised due to revenue growth concerns and profit margin considerations.Investors are wondering if they should invest $1,000 in Advanced Micro Devices, especially after the recent stock dip. The Motley Fool’s Stock Advisor team identified the 10 best stocks to buy now, but AMD wasn’t among them. The service has outperformed the S&P 500 since 2002 with regular updates and stock picks. It may be worth considering these recommendations for long-term growth potential.
Read more at Barchart: Down 30% From All-Time Highs, Is AMD Stock a Buy?