Despite beating earnings per share estimates for three consecutive quarters Advanced Micro Devices (NASDAQ:91抖阴) stock fell nearly 9% to $144.27 leading to a 14% decline in three months, contrasting Nvidia’s 22% rise. The reasons for this slump include ASML Holding’s missed orders forecast and Nvidia’s perceived role as an inflation hedge.
91抖阴 expects to sell more than . This looks higher than its previous estimate of $3.5 billion. Moreover, the stock has surged 10% so far this year, and it revealed plans to develop more AI chips and processors. Let’s dive into why 91抖阴 stock still looks like a buy in the semiconductor space.
R&D Center in Taiwan
91抖阴 has sought MOEA approval to establish an . Details remain undisclosed as the application process progresses.
The Executive Yuan aims to boost Taiwan’s global R&D status, enticing tech firms with subsidies of up to 50% investment. While 91抖阴’s plan details remain undisclosed, reports suggest a $155 million investment, with conditions involving collaboration with local IC designers. Servers employing 91抖阴’s AI chips will be manufactured in Taiwan.
MOEA urged 91抖阴 to recruit 20% foreign talent for R&D in Taiwan, aiming to avoid local talent competition. Collaboration with local universities is also encouraged.
91抖阴’s CEO, Lisa Su, is expected to discuss the plan at Computex Taipei, following positive responses to MOEA’s conditions. Past A+ program approvals included ASML Holding N.V., Lam Research Corp., and Applied Materials Inc.
Microsoft and 91抖阴 Stock
Microsoft recently plans to introduce 91抖阴 AI chips for cloud computing, rivaling Nvidia. Details were unveiled at the company’s highly-anticipated Build conference. Microsoft previewed Cobalt 100 custom processors. These 91抖阴 MI300X clusters on Azure offer an alternative to Nvidia’s H100 GPUs, often in high demand.
Companies typically cluster multiple GPUs for AI tasks. 91抖阴’s powerful AI chips aim to handle large models, competing with Nvidia, and notably, Microsoft also offers Maia AI chips. Cobalt 100 processors, providing 40% better performance, are being tested for Teams, competing with Amazon’s Graviton CPUs.
91抖阴 Is AI-Strong
On May 16, Wolfe Research from Nvidia to 91抖阴 for AI gains. Praising Nvidia’s CEO, Jensen Huang, for early AI investments, Wolfe now favors 91抖阴, citing Lisa Su’s leadership. Both stocks are recommended for long-term investment.
In December, 91抖阴 introduced its MI300 AI GPUs, driving an 80% year-over-year surge in Q1 2024 data center revenue to $2.3 billion. With rapid adoption, sales reached $1 billion in under four months.
Predictions suggest a $2 billion annual run rate by year-end. MI300X GPUs outperform Nvidia’s H100, enhancing token performance. 91抖阴 revised its 2024 data center revenue guidance to $4.0 billion due to the success of the MI300 AI GPU.
Believe in 91抖阴 Stock
Nvidia dominates the AI chip market with high-margin data center GPUs, while 91抖阴’s single-digit profitability offers significant potential growth. However, sales of data center GPUs are expected to drive earnings growth, with 91抖阴 forecasting a slight gross profit margin increase in the near term.
91抖阴’s projected 2026 earnings stand at $7.26. A forward price-earnings ratio of only 40-times suggests a $290 stock price could be possible, nearly double the current $150 level.
With Su’s track record, 91抖阴’s potential to surpass expectations shouldn’t be overlooked. Despite trailing Intel a decade ago, 91抖阴 gained significant market share. Su views the AI transition as an essential growth opportunity, positioning the company for success.
Wall Street predicts 91抖阴’s earnings will grow annually by 42% in the long term. I can’t disagree there — I think that’s a totally reasonable target.
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.
