What will happen to AMD's AI business in Q1?

Advanced Micro Devices Stock (Nasdaq
Nasdaq
AMD) plans to report its first-quarter 2024 financial results around the end of April, reporting on a quarter where the company is likely to benefit from an improving PC market and rising demand for artificial intelligence chips. AMD expects adjusted revenue for the quarter to be between $5.1 billion and $5.7 billion, which could represent up to 7% year-over-year growth. The company is targeting a gross profit margin of 52% this year, an increase of 200 basis points from the previous year.

AMD's performance in the first half of 2023 was mixed as the PC industry slumped as tailwinds such as working and learning from home weakened due to the coronavirus pandemic. However, things may pick up a bit in 2024. According to Canalys, his total PC shipments in the first quarter of 2024 increased by 3.2% year-on-year to 57.2 million units. AMD's growth could be a little better as the PC vendor processed the chip inventory it built through the pandemic in the first few quarters of 2023.This could increase demand for products from Intel and others
intel
This is because PC vendors replenish their inventory. On the server side, AMD may continue to gain market share over rival Intel, but Intel faced the challenge of moving to smaller, more advanced process nodes. However, given the seasonal decline in sales of server processors, the decline is likely to continue.

We'll be keeping an eye on AMD's GPU sales performance given the surge in demand for generative artificial intelligence software. Graphics processing units are becoming the de facto chip for running AI-related workloads. AMD's GPUs have typically been used more in gaming and professional applications compared to his Nvidia chips, which are the go-to GPUs for accelerated computing applications, but AMD is currently leading the way in the AI ​​market. We are also focused on winning. The company announced new chips such as his MI300X chip, specifically targeted at large-scale language model training and inference for generative AI workloads. AMD projects AI-related chip sales of at least $3.5 billion in 2024, but this number will be much higher given the surging demand for AI applications and the need for Nvidia alternatives. there is a possibility.

AMD stock has risen a very significant 65% from the $90 level in early January 2021 to about $150 today, compared to about 35% for the S&P 500 over the past three years. Compare with rise. However, the rise in AMD stock has been far from consistent. The stock returned 57% in 2021, -55% in 2022, and 128% in 2023. By comparison, the S&P 500 returned 27% in 2021, -19% in 2022, and 24% in 2023.that AMD underperformed S&P In 2022. actual, Consistently outperforms the S&P 500 – Good times and bad times – The past few years have been difficult for individual stocks. Information technology sector stalwarts like MSFT, AAPL, and NVDA, as well as mega-sized companies like GOOG, TSLA, and AMZN.

In contrast, the Trefis high-quality portfolio, which includes a collection of 30 stocks, Outperformed the S&P 500 every year over the same period. why is that? As a group, Headquarters portfolio stocks carried less risk and delivered better returns compared to the benchmark index. It's not been a roller coaster ride, as evidenced by the performance metrics of our corporate portfolio. Considering the current uncertain macroeconomic environment of soaring oil prices and rising interest rates, AMD is likely to face a similar situation in 2022. Underperform the S&P Will we see a significant increase over the next 12 months?

AMD stock has seen meaningful gains over the past year. AMD's consensus 2024 earnings is approximately 44x, which is a relatively high multiple. However, the continued recovery of the PC market and the surge in demand for AI applications may justify this to some extent. Although we value AMD's stock at approximately $145 per share, approximately 5% below the current market price, we will reconsider our stock price expectations for the company following its first quarter results. Check out our analysis. AMD evaluation: Is AMD stock expensive or cheap? Learn more about AMD's price quote factors here. See also our analysis. AMD's revenue Learn more about the company's major revenue sources.

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