Is It Time to Buy AMD Stock Near Its 52-Week Low?

This year has seen enormous excitement surrounding the tech sector and advancements in artificial intelligence (AI). However, one company that has struggled amidst this excitement is Advanced Micro Devices (AMD). As of the latest reports, AMD's shares have fallen by 15% since the start of the year, bringing them close to their 52-week low, despite the company's long-term potential.

The question arises: is now the right time to consider investing in AMD stock?

Reasons for AMD's Underperformance in 2023

In comparison to its rival, Nvidia, AMD has not performed as well. Nvidia has consistently been a hot investment and is now among the top three most valuable companies, boasting a market cap of approximately $3.2 trillion—more than 16 times that of AMD's $200 billion.

AMD's current stock valuation is concerning, trading at over 110 times its trailing earnings. Furthermore, its revenue growth has been unimpressive when placed alongside Nvidia's numbers.

Despite the overall tech market flourishing, AMD has not matched this pace of growth, leaving investors looking for a significant spark to regain interest in its stock.

On the bright side, AMD has affirmed that it is on track to reach record revenue in 2024 and is witnessing strong growth across various sectors. However, investors might remain skeptical, especially when comparing AMD's potential growth to that of other tech firms this year.

Fortunately, there may be a light at the end of the tunnel: AMD predicts an uptick in growth by the fourth quarter, with management estimating sales of about $7.5 billion, reflecting a 22% increase year-over-year.

The Impact of AMD's New Chip on Future Stock Performance

AMD is actively targeting the AI chip market, aiming to capture some market share from Nvidia. Many businesses may be interested in more cost-effective chip solutions or may want to diversify their supply chains to avoid dependence on a single supplier.

Recently, AMD introduced the MI325X chip, claiming it performs 30% faster than Nvidia's H200. If this claim holds true, it could provide substantial competition to Nvidia, foster notable revenue growth, and offer AMD's stock a much-needed boost by 2025.

Should Investors Buy AMD Stock Now?

Although AMD has not been a lucrative investment in 2023, it might be an undervalued stock heading into the new year. With the upcoming chip rollout and a forecasted acceleration in growth, the elements are aligning for AMD to have a stronger performance in 2025.

While it might appear pricey based on trailing metrics, AMD trades at a forward price-to-earnings ratio of 25, making it more appealing for long-term investors. Given the company's prospects in the AI chip space, it may be one of the better stocks to consider right now, as it seems to be flying under the radar for many investors, which could be a tactical oversight.

This article presents an analysis but does not constitute investment advice.

AMD, Investment, Stocks