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Buying This Artificial Intelligence (AI) Chip Stock Is a No-Brainer After This Development
AMDAMD(AMD) The Motley Fool·2025-02-12 11:45

Core Viewpoint - Advanced Micro Devices (AMD) reported strong growth in its fourth-quarter 2024 results, beating Wall Street expectations for both revenue and earnings, yet the stock fell 6% due to a miss in data center revenue [1][2]. Data Center Revenue Performance - AMD's data center revenue for the quarter was 3.9billion,fallingshortoftheconsensusestimateof3.9 billion, falling short of the consensus estimate of 4.15 billion [3]. - The company forecasted a 7% sequential decline in data center revenue for the current quarter, which contributed to investor concerns [4]. - Despite the shortfall, AMD's data center revenue increased 69% year-over-year, reaching record levels, driven by sales of AI data center accelerators and server processors [4][5]. - Full-year data center revenue hit a record 12.6billion,nearlydoublethepreviousyear,withexpectationsforsimilarrevenueinthefirsthalfof2025comparedtothesecondhalfof2024[5].ProductTransitionandFutureOutlook−AMDistransitioningtoitsnext−generationMI350AIgraphicscards,withsamplingstartinginthecurrentquarterandshipmentsexpectedbymid−year[6].−Thecompanyanticipatesstrongdouble−digitgrowthindatacenterrevenuefor2025,withCEOLisaSuprojectingsubstantialgrowthinthedatacenterbusinessoverthenextfewyears[7].ClientSegmentPerformance−AMD′sclientsegment,whichincludesdesktopandnotebookprocessors,sawa5812.6 billion, nearly double the previous year, with expectations for similar revenue in the first half of 2025 compared to the second half of 2024 [5]. Product Transition and Future Outlook - AMD is transitioning to its next-generation MI350 AI graphics cards, with sampling starting in the current quarter and shipments expected by mid-year [6]. - The company anticipates strong double-digit growth in data center revenue for 2025, with CEO Lisa Su projecting substantial growth in the data center business over the next few years [7]. Client Segment Performance - AMD's client segment, which includes desktop and notebook processors, saw a 58% year-over-year increase to 2.3 billion, outperforming the overall PC shipment growth of 1.8% [8]. - The company expects to continue gaining market share in the PC CPU market, estimating a mid-single-digit increase in PC shipments for 2025 [9]. Overall Growth Expectations - AMD projects a 30% year-over-year increase in revenue for Q1, targeting $7.1 billion, which indicates an improvement over the 24% increase in Q4 2024 [10][11]. - The company anticipates a 2 percentage point increase in non-GAAP gross margin for Q1, which should lead to significant bottom-line growth following a 42% year-over-year earnings increase last quarter [12]. - Analysts expect AMD to achieve 43% earnings growth in 2025, an improvement over the previous year's 25% growth, supported by a rebound in the data center business and strong PC segment momentum [13]. Investment Consideration - AMD's stock is currently trading at an attractive 23 times forward earnings, which is a discount compared to the Nasdaq-100 index's forward earnings multiple of 28, while the company continues to demonstrate robust growth [14].