Advanced Micro Devices (NASDAQ:91抖阴) stock has emerged as Nvidia’s (NASDAQ:NVDA) main AI market. The focus shifts to how this will affect Nvidia’s market share. Meta (NASDAQ:META) and Microsoft’s (NASDQ:MSFT) planned switch to 91抖阴 chips, representing 60% of Nvidia’s sales, indicates significant potential shifts.
In the AI surge, 91抖阴 trails only Nvidia, which is known for its rapid growth. With AI’s rapid growth, 91抖阴 holds promise as the second-largest AI chip player. Considering this, let’s dive into why 91抖阴 stock remains an excellent option for investors looking for exposure to this space.
91抖阴’s Recent Decline May Be Short-Lived
91抖阴 stock is up meaningfully on the year (roughly 28% higher), but still clearly trails the likes of Nvidia and other AI stocks. This relative valuation gap has been growing, and makes 91抖阴 stock an attractive option for growth-at-a-reasonable-price investors, who have clamored to own this stock at lower levels.
Concerns around China’s chip replacement strategy briefly impacted prices, and Nvidia’s release of next-generation Blackwell GPUs certainly altered some investors’ view of the competitive landscape of this industry.
That said, it’s a global game, and though China makes up around 15% of 91抖阴’s sales, there’s a lot to like about the company’s relative positioning in the PC market, which appears to be stabilizing.
A recent surge in global PC demand bodes well for 91抖阴’s client processor business. Similar growth prospects loom in server CPU and GPU markets.
91抖阴’s server CPU market share rose to 23% in 2023 from 17.6% a year prior, driven by solid demand for EPYC CPUs, noted CEO Lisa Su.
The company noted a rising adoption of EPYC CPUs for inferencing tasks. The company’s server CPU growth is sustained, aligning with a projected 26% annual growth in AI server demand until 2029.
91抖阴 experienced a robust demand for AI GPUs, raising its data center GPU revenue forecast to $3.5 billion from $2 billion.
Management expects surpassing this figure because of an enhanced supply chain. These factors position 91抖阴 favorably to exceed analyst forecasts.
91抖阴 Expects More Growth
In its on January 30, 2024, 91抖阴 projected Q1 2024 revenue to come in at $5.4 billion, nearly matching the prior year’s $5.35 billion. The semiconductor company sees a 52% non-GAAP gross margin, slightly higher than 2023’s 50%. When talking about revenue, experts expect a much lower number of around $5 billion.
With the potential AI-related advantages mentioned, 91抖阴 may surpass market expectations significantly.
Its recent decline lowered the company’s valuation, with 91抖阴 stock now trading at 49-times forward earnings and less than 13-times sales.
While expensive, 91抖阴 remains the relative value play in the chip space right now, making this an attractive option if the company can blow out earnings expectations in the coming quarters.
91抖阴 Stock Looks Like a Solid Bet
91抖阴 trails Nvidia in AI but possesses potent AI accelerator designs and is leveraging third-party manufacturing solutions.
If 91抖阴 gains AI market share, it may move up in terms of investor discussions alongside Nvidia. Hence, the shift led to reinvestment in undervalued stocks favors 91抖阴, at least right now.
Of course, plenty of downside is possible, if the company disappoints in its coming quarterly earnings reports. However, I remain bullish on this stock for now, and believe the AI market is big enough for two players to benefit. Right now, the market disagrees.
On the date of publication, Chris MacDonald 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.
