To The Moon

2024 was a year of significant ups and downs for Advanced Micro Devices ( $Advanced Micro Devices(AMD)$ ), marked by stellar growth in key sectors and unexpected downturns in others. As we stand at the threshold of 2025, let's delve into the year that was, the reasons behind AMD's market performance, and what the future might hold for investors.

AMD SP's performance in 2024

Performance in 2024: A Tale of Two Halves

Early 2024 - The Highs:

• Revenue Surge: AMD started 2024 with a bang, reporting an 18% year-over-year (Y/Y) increase in Q3 revenue to $6.8 billion, surpassing expectations by $110 million. This was largely driven by a 122% Y/Y growth in data centre revenue, amounting to $3.5 billion, thanks to the booming demand for AI GPUs.

• AI GPU Demand: AMD's revenue forecast for its AI chip, the MI300 series, increased from $2 billion to over $5 billion in 2024, highlighting its strategic positioning in the AI market.

• Market Share Gains: AMD's share in the server CPU market grew, with their EPYC processors gaining traction among tech giants, further bolstering its stock price in the year's first half.

Mid to Late 2024 - The Lows:

Stock Decline: Despite these gains, AMD's stock fell from a high of $227 in March to around $118 by year-end, a 49% dip. This decline was influenced by several factors:

• Gaming and Embedded Segments: These segments saw sharp declines, with gaming down 48% and embedded down 46% in Q1, indicating sector-specific challenges.

• Market Overvaluation Correction: After the initial surge, investor sentiment adjusted to a more realistic valuation, especially given the supply chain issues and competitive pressures from Nvidia.

• AI Market Saturation Concerns: There were worries about whether the AI market could sustain the rapid growth seen in early 2024, impacting stock performance.

Full Year Returns for 2024: Investors starting the year with AMD would have faced a rollercoaster, ending with negative returns due to the significant year-end drop. However, those who held through the volatility might see a silver lining with the company's strategic moves.

Looking Forward to 2025: Growth on the Horizon?

Fundamental Growth:

• AI and Data Center Expansion: For 2025, AMD projects an additional revenue increase, with data centre GPU sales expected to hit $5 billion, a testament to the growing demand for AI solutions.

• New Product Roadmap: AMD plans to introduce new AI accelerators annually, with the MI325x and MI500x in the pipeline, aiming to compete more aggressively with Nvidia.

• Industry Outlook: The semiconductor industry is expected to see continued growth, particularly in AI, cloud computing, and data centres. AMD's focus here positions it well for potential outperformance.

Investment Analysis for 2025:

• Market Share: Analysts predict AMD will continue gaining share in AI GPUs, server CPUs, and PC clients, with some suggesting a stock price recovery to around $175.

• Comparison with Peers: While Nvidia ( $NVIDIA(NVDA)$ ) leads in AI GPUs, AMD offers a relatively lower forward P/E ratio, making it an attractive option for investors looking for growth with less risk of overvaluation. However, the competitive landscape remains fierce.

Investment Considerations:

Investing in AMD stock involves inherent risks. Investors should carefully consider their risk tolerance, investment objectives, and the potential impact of macroeconomic and industry-specific factors before making any investment decisions.

Conclusion

AMD's 2024 was a testament to the volatile nature of tech stocks, where innovation can drive rapid growth, but market dynamics and competition can just as quickly recalibrate expectations. For 2025, AMD appears poised for a rebound, driven by its strategic focus on AI and data centres. Investors contemplating AMD should weigh its growth potential against market risks, understanding that while the journey might be turbulent, the destination could offer substantial rewards. Whether AMD will outperform its peers or merely keep pace remains to be seen, but for those with an appetite for growth and an eye on the burgeoning AI sector, AMD could still represent a compelling investment opportunity.

@TigerWire