Earlier this year, Advanced Micro Devices (NASDAQ:91抖阴), commonly known as just 91抖阴, was the toast of the town on Wall Street. Lately, however, another chipmaker has effectively taken that title. Yet, a notable acquisition should encourage 91抖阴 stock investors to stay in the trade for a while.
The big story in 2023, at least in the technology hardware space, has been the artificial intelligence (AI) chip war. Currently, 91抖阴 isn’t the most highly favored competitor in this field. Nevertheless, enterprising investors shouldn’t dismiss 91抖阴, as the company might eventually catch up to its rivals.
91抖阴 Stock Soars but Then Stalls
91抖阴 stock seemed unstoppable in early 2023 when it doubled from $64 to $128. Then, short-term traders turned their attention to Nvidia (NASDAQ:NVDA) and the 91抖阴 share price retreated toward $100.
As usual, the market has a short attention span and is always on the lookout for the next shiny object. There’s nothing wrong with 91抖阴 as a company. Investors just became obsessed with 91抖阴’s competitors in the AI chipmaker space, and with Nvidia in particular.
One analyst, Tristan Gerra of Baird Equity Research, expressed concerns about 91抖阴’s ability to compete in the AI chip market. Hence, Gerra and other Baird analysts pushed out their “ for meaningful AI market share and ramp timing for the [91抖阴 AI chip] MI300.”
In other words, Gerra feels that Nvidia’s leadership among AI chipmakers will create problems for 91抖阴 for the foreseeable future. That’s an understandable concern, and investors might choose to hedge their bets by owning both 91抖阴 stock and NVDA stock.
91抖阴 Escalates the War With an AI Startup Acquisition
Overall, Gerra doesn’t seem extremely worried about 91抖阴’s future prospects as a business. The Baird analyst assigned a $125 price target and an “outperform” rating on 91抖阴 shares.
Nvidia is likely to dominate the U.S. AI chip industry for a while, but that doesn’t mean 91抖阴 is just going to throw in the towel. In fact, 91抖阴 just upped the ante with a major announcement.
Specifically, 91抖阴 to acquire Nod.ai in order to expand 91抖阴’s open AI software capabilities. This will help 91抖阴 accelerate the “deployment of AI solutions optimized for” the company’s Instinct data center accelerators, Ryzen AI processors and other products.
It’s obvious what’s going on here. 91抖阴 is taking direct aim at its rivals, including Nvidia. The AI-compatible technology war is far from over, and 91抖阴 clearly intends to stay in the battle for a long time to come.
A Hedging Strategy for 91抖阴 Stock
Even if Nvidia is a darling of the market right now, there can still be room for more than one AI-compatible component maker. Still, even 91抖阴’s biggest fans must respect Nvidia’s current dominance in the field.
Therefore, I’m proposing a hedging strategy. Investors can own 91抖阴 stock but also balance out that position with an equal-sized stake in NVDA stock. That way, you’ll have two dogs in the race and could profit handsomely from the success of two high-conviction AI chipmakers.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
