Advanced Micro Devices (NASDAQ: AMD) has been on a remarkable journey over the past five years, with its shares returning an impressive 441%. This growth has largely been driven by the company’s gains in market share against industry giant Intel in central processing units (CPUs). However, the real opportunity for AMD lies in the data center market, particularly in selling graphics processing units (GPUs) for artificial intelligence (AI) workloads.
The demand for AI hardware has already propelled Nvidia’s stock to new heights, and analysts believe that AMD could be next in line to benefit from this trend. AMD CEO Lisa Su has highlighted the potential for the company in the data center space, estimating that the market for AI accelerators could reach a staggering $400 billion by 2027. This is a significant figure compared to AMD’s current outlook for data center GPU revenue.
Recent customer deployments of AMD’s Instinct GPUs and strong demand for its Epyc server chips have driven high-double-digit growth in the data center segment. The company’s new MI300 accelerators are expected to be a game-changer, with Microsoft and Meta Platforms already utilizing these chips for their AI workloads.
Analysts are optimistic about AMD’s future revenue growth, with expectations of a 14% increase in 2024 followed by a 26% jump in 2025. This growth trajectory could have a significant impact on AMD’s profits, potentially driving record earnings per share.
While Nvidia has been the dominant player in the AI chip market so far, AMD’s growing data center revenue could lead to substantial profitability gains. With the market underestimating its future earnings growth potential, AMD’s stock could see significant upside in the coming years.
Analysts currently forecast AMD’s earnings to reach $7.26 in 2026, which could double the stock price from its current level. Given CEO Lisa Su’s track record of success and the company’s strategic positioning in the AI market, investors should not overlook AMD’s potential for further growth.
Before investing in Advanced Micro Devices, investors should consider the insights provided by The Motley Fool Stock Advisor analyst team. While AMD may not have made their list of top stocks, the potential for significant returns in the AI market is undeniable. With the right strategy and guidance, AMD could be a lucrative investment opportunity for the future.
