July 14, 2024

CNN Business estimates that Advance Micro Device stock, which is currently 10% below its peak in November 2021, is roughly 7% overpriced. That does not seem like a good opportunity to buy.

To be fair, Advance Micro Device’s stock has increased 119% in 2023 so far; the Wall Street Journal reports that 9.3% of its float is sold short.

The company has a lot of positive aspects. Following decades of unsuccessfully competing with Intel in the personal computer and server markets, Advance Micro Device stock dropped to roughly $2 per share following a 25% workforce layoff by the chipmaker, according to Fast Company.

Ten years later, Advance Micro Device emerged as the top rival to Intel (INTC +0.4%) thanks to its innovations in chips for tablets and smartphones. Thanks to astute design choices and Intel’s “technological stumbles,” AMD’s revenue in December 2023 quadrupled compared to that of 2017; in the same time frame, Intel’s business shrank by 16%, according to the Wall Street Journal.

Investors are overestimating AMD’s potential growth after the company’s spectacular rise this year. This is mainly because they expect Advance Micro Device to challenge Nvidia’s hegemony in the market for GPUs, which are needed to power generative artificial intelligence.

Advanced Micro Device

There are two reasons, in my opinion, not to invest in AMD stock:

  • In terms of AI GPU software, AMD lags far behind Nvidia.
  • It might be difficult to top predictions for AMD’s expansion in data centers.

AMD unveiled an AI chip in June to compete with Nvidia, which holds an 80% market share in GPUs. According to AMD, mass production of the MI300X GPU would begin in the third quarter of 2023, and deliveries would begin by the end of the same year, as reported by Fast Company.

According to Fast Company, AMD CEO Lisa Su referred to MI300X as “the world’s most advanced accelerator for generative AI” and asserted that AI would turn into the business’s “most significant and strategically important long-term growth opportunity.”

Will Su’s expectations for AMD’s AI chip come true?

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