[Article] Why AMD Stock Is A Gift At $138 (Technical Analysis)

Summary

• Advanced Micro Devices, Inc. is undervalued at $138, with significant profit growth potential, especially in the booming data center segment.
• AMD's data center sales surged 122% YoY in Q3, driven by the MI300 accelerator, positioning it as a strong competitor to Nvidia Corporation.
• Despite short-term technical challenges, AMD's fundamentals are robust, with expected profit growth of 54% in 2024, making it a compelling investment.
• Nvidia's supply constraints offer AMD a springboard opportunity to capitalize on its data center GPU market, enhancing its long-term growth prospects.
  *springboard: 도약 시 발판

The stock price development of Advanced Micro Devices, Inc. (NASDAQ:AMD) has been disappointing, with the chip company lagging substantially behind Nvidia Corporation (NVDA), *그 반도체 회사가 NVDA에 비해 상당히 뒤쳐지면서the clear leader in the market for data center GPUs.

Advanced Micro Devices has recently fallen into a downtrend despite profiting handsomely *후하게, 풍부하게 from accelerating growth in its data center reporting unit. In my view, Advanced Micro Devices' correction after 3Q24 earnings is a golden buying opportunity for investors, and I think that the market presently underestimates AMD's profit growth.

I see market share gains for Advanced Micro Devices on the horizon *저는 AMD가 앞으로 시장 점유율을 확대할 것으로예상합니다. *horizon: 가까운 미래, 지평선 and, in my view, the stock is ripe for an upside retracement. *제 생각에는, 이 주식이 상승 조정에 적합한 시점입니다. (전체적인 하락 추세 내에서의 단기적인 상승 의미)

 

My Rating History

My last stock classification on Advanced Micro Devices was "Strong Buy" as I foresaw a considerable upside for the chip company *반도체회사 related to the scaling of MI300 accelerator sales.

In the third quarter, Advanced Micro Devices' data center sales skyrocketed 122% YoY, highlighting that the data center is now the hottest target market for the chip company.

With sales growth accelerating amid an MI300 accelerator ramp, I think Advanced Micro Devices could be a compelling *매력적인, 강렬한 chip investment.

 

Advanced Micro Devices' Data Center Business Is Seeing Skyrocketing Demand *AMD의 데이터센터 사업이 폭발적인 수요 증가를 보고 있습니다

Advanced Micro Devices' data center division is booming, to say the least. In the third quarter, data centers contributed a whopping $3.5 billion to Advanced Micro Devices' sales, or a total of 52% of net sales. Last year, data centers produced a relatively meager $1.6 billion in total sales, or a total of 28% of net sales, so data centers are now accounting for more than half of AMD's sales mix.

Data centers have become much more prominent *저명한, 두드러진 for chip companies as a source of sales and operating income profit growth due to the rise of ChatGPT-like chatbots that have taken the market by storm.

Companies are spending billions of dollars per quarter to build IT infrastructure to accommodate *수용하다 tens of thousands of AI accelerators, and AMD is the second-biggest beneficiary of this trend, right after Nvidia.

 

 

The data center segment is where Advanced Micro Devices obviously now has the most momentum, not only in terms of sales but also in terms of operating profit growth. The chip company's data center operating profits amounted to $1.04 billion in the third quarter, up 240% YoY, highlighting that Advanced Micro Devices has substantial leverage to grow its total profits moving forward.

With total sales rising 122% YoY, and operating profits skyrocketing 240% YoY, the data center segment can churn out *대량으로 생산하다 accelerating operating profit growth. *데이터센터 부문은 가속화된 영업 이익 성장을 창출할 수 있습니다. The main drivers for AMD's growth in these important key performance indicators are higher (data center) sales and higher gross margins.

 

 

The main catalyst that makes this growth happen is the accelerating shipping of MI300 Instinct chips, which are Advanced Micro Devices' answer to Nvidia's H100 data center chip. This accelerator started to ship this year and Advanced Micro Devices has a couple of aces up *비장의 카드, 유리한 위치에 있는 상태, 감춰진 이점 its sleeve to *비장의 무기, 감정이나 생각을 드러냄 keep the data center sales train going: in 4Q24, the latest iteration *반복 of the Instinct chip, the MI325X, will be made available to customers. The MI325X is equipped with HBM3E, which leads to stronger memory performance and is therefore ideal for AI-focused applications.

Moreover, Advanced Micro Devices is planning to release the CDNA 4-powered MI350 series in 2025 which will then be followed by the MI400 series in 2026. The chip roadmap, in my view, is a key element that could support the present upswing in data center sales and operating profits.

Nvidia just forecasted $37.5 billion in sales for its last financial quarter, as the chip company is starting to deliver the highly anticipated Blackwell chip to its data center customers.

As has been reported previously, Nvidia's supply of Blackwell chips has already been depleted *고갈된, which is something that could actually work to help upscale Advanced Micro Devices' MI300 Instinct deliveries.

 

Technical Chart Profile

The short-term sentiment *감정, 의견 picture of Advanced Micro Devices does not look too compelling, to be honest: The chip company has fallen through the 20-day, 50-day, and 200-day moving average lines in a short period of time, which substantially deteriorated *악화된 the chart picture for the chip company.

Presently, Advanced Micro Devices' stock is neither overbought nor oversold based on the Relative Strength Index, but the trend is negative. The Relative Strength Index presently flashes a value of 38, which puts the sentiment close to being oversold (which is usually associated once the RSI drops below 30).

On the flip side, Advanced Micro Devices has strong support in the $130 price region, a price level that investors should expect to get tested in the short term.

With that said, the fundamentals in Advanced Micro Devices' business are very robust, particularly in data centers, and I would anticipate AMD's stock price to follow the stock price at some point.

 

 

AMD Is A Gift At $138

At the time of writing, Advanced Micro Devices' stock sells for $138, and the market models $3.33 in profits per share this year. Based on this estimate, the market anticipates 26% profit growth in 2024.

Next year, the consensus estimates imply a YoY profit growth of 54%. In essence *본질적으로, this means that the market expects Advanced Micro Devices to double its profit growth YoY, predominantly *주로, 압도적으로 because the company is releasing fresh accelerators targeting the data center market. The consensus estimate for 2024 leads us to a profit multiple of 41x. For 2025, the profit multiple falls to 27x.

Nvidia is selling for profit multiples for 2024 of 50x and 34x for 2025, so Advanced Micro Devices is by a good 20% cheaper than its leading peer.

Nvidia, however, is anticipated to grow its profits by 125% in 2024 and 49% in 2025. The difference in expected EPS growth obviously explains why Nvidia is selling at a higher profit multiple than Advanced Micro Devices.

With that said, investors may want to pay attention to the fact that Advanced Micro Devices' profit growth is projected to accelerate next year, whereas Nvidia's profit growth is expected to decelerate.

If the market acknowledges that Advanced Micro Devices progresses in terms of its product roadmap and data center ship upscaling in 2025 and 2026, I think AMD could be a very lucrative investment moving forward.

 

 

Why The Investment Thesis *주장 Might Be Wrong

Advanced Micro Devices does not have as robust a market position in data center GPUs as Nvidia, which essentially owns the market. With that said, Nvidia already selling out its Blackwell GPUs points to Advanced Micro Devices having a springboard opportunity that the chip company could leverage to its benefit.

If Advanced Micro Devices failed to take advantage of this opportunity or if the data center market, as a whole *전반적으로, experienced cutbacks in spending on large-language models, then the investment thesis for Advanced Micro Devices could be derailed.

 

My Conclusion

Advanced Micro Devices is a gift at $138, and I doubt that the stock is really that expensive given AMD's potential for profit growth in the medium term.

Advanced Micro Devices' valuation needs to be seen in the context of expected profit growth and I think that Advanced Micro Devices is actually really looking good here: The chip company is anticipated to grow its profits by 54% next year while this year's profits are expected to rise 26%.

Consensus estimates also reflect an element of acceleration here, which is, in my view, what makes Advanced Micro Devices a compelling *매력적인 investment. AMD is anticipated to fully scale up its data center chip sales in 2025 whereas Nvidia already had substantial success in surging its profits.

Considering that Advanced Micro Devices' profits are set to scale up next year at a quickening pace, I think AMD is very good value at 27x leading profits.

 

출처: https://seekingalpha.com/article/4740677-why-amd-stock-is-a-gift-a-138-technical-analysis