Title: Why AMD Stock is Set to Skyrocket in the Next Decade: An Examination
AMD's stock has taken a hit recently, with weak PC sales and concerns about competition in the AI accelerator market weighing on its value. At a glance, the numbers don't look great: AMD's revenue for the first nine months of 2024 has incremented by 10%, significantly less than Nvidia's triple-digit increases. Furthermore, revenues in the gaming and embedded segments have witnessed a slide of 58% and 38%, respectively, over the same period.
However, there's a silver lining for AMD investors. The chip industry is experiencing a long-term trend that should halt the downward spiral and propel the stock skyward in the coming years. Here's why.
AMD's Edge
Despite the competitive challenges, it's premature to dismiss AMD's AI accelerator business and its potential to transform the company fundamentally. Allied Market Research predicts a robust growth rate of 38% for the AI chip market through 2032. Given this striking projection, we can expect significant expansion over the eight-year period.
In fact, AMD's gaming and embedded woes haven't stopped it from capturing a notable piece of the market. With the scarcity of Nvidia accelerators, big-names like Microsoft and Meta Platforms have turned to AMD. Consequently, data center revenue, which includes AI accelerators, surged by an impressive 107% during the first nine months of 2023.
Perhaps more importantly, the data center segment has accounted for an impressive 48% of AMD's revenue in 2023. On the other hand, Nvidia's data center segment amounts to an overwhelming 87% of its revenue for the first nine months of its fiscal year 2025 (ending Oct. 27). Eventually, the data center segment is poised to contribute more to AMD's revenue, potentially matching Nvidia's 87% share in the future.
Even if a recovery in other segments diminishes the data center segment's percentage share, the improving growth trajectory is likely to boost AMD's stock performance over the subsequent eight years.
Note:
The AI chip market is projected to grow at a staggering CAGR of 31.2% from 2024 to 2033, reaching USD 341 billion by 2033[1]. From 2024 to 2029, the global AI chip market is projected to expand from USD 123.16 billion to USD 311.58 billion, with a CAGR of 20.4%[2]. By 2034, the global AI chip market is expected to swell from USD 73.27 billion to USD 927.76 billion, with a yearly growth rate of 28.90%[3].
AMD's data center performance has been remarkable, driven primarily by the burgeoning demand for AI and data center services. The segment has experienced a substantial revenue surge, especially with Microsoft and Meta's adoption of AMD's MI300X accelerators[2]. While the specific CAGR figures for AMD's data center segment are unavailable, the general trend indicates that AMD is capitalizing on the expanding Total Addressable Market (TAM) of data centers and AI, which is projected to keep growing[2].
In light of the robust growth forecasted for the AI chip market, with Allied Market Research predicting a 38% CAGR through 2032, investors may consider investing in AMD's finance to leverage this potential transformation. AMD's data center revenue has already seen impressive growth, surging by 107% during the first nine months of 2023, driven by the demand for AI and data center services.
