Powering the AI Wave: Is AMD Stock the Smart Investor’s Choice?

Stocks to buy

Advanced Micro Devices (NASDAQ:AMD) sells hardware components for personal computers, data centers, cloud computing and more. However, AMD stock traders in 2023 want to know if the company’s artificial intelligence processors are generating strong revenue. Overall, the answer is yes but you’ll definitely want to hear the full story before making any investment decisions.           

Sure, AMD also makes money from its Ryzen Threadripper processors for PCs. Yet, AMD can’t rely on the PC market for income. Today’s investors are mainly interested in AMD’s MI300 processors, which can handle intense workloads for generative AI applications. So, let’s see if AMD’s recently published results and outlook point to outsized AI market returns for the company and its shareholders.

Why Did AMD Stock Fall After the Q3 Earnings Report?

On the whole, AMD’s third-quarter 2023 earnings report surpassed Wall Street’s expectations, but only slightly. Starting with the top-line results, AMD generated $5.8 billion in revenue, beating the analysts’ consensus estimate of $5.7 billion.

Meanwhile, AMD’s Q3 adjusted earnings came to 70 cents per share versus Wall Street’s call for 68 cents per share. Again, these are slight Street beats, but so far, there’s nothing really objectionable here.

AMD stock declined after the company released its third-quarter earnings report. The culprit wasn’t the results for that quarter, however. Rather, the market seemingly took issue with AMD’s current-quarter sales guidance.

Specifically, AMD’s fourth-quarter outlook called for revenue of “approximately $6.1 billion, plus or minus $300 million.” This forecast fell short of the analysts’ consensus estimate of $6.4 billion.

AMD Prepares for Strong AI Processor Sales

Even if the market wasn’t impressed with AMD’s sales guidance, the company’s chief executive looked forward to delivering robust AI hardware sales. AMD CEO Lisa Su emphasized the company’s “ramp of Instinct MI300 accelerator shipments to support multiple deployments with hyperscale, enterprise and AI customers.”

During a conference call, AMD reported strong early orders for its MI300 processor. Impressively, AMD’s management is preparing for this processor to generate $400 million in revenue in the fourth quarter, and even $2 billion in the full year of 2024.

In addition, AMD’s management even projected that the MI300 processor is on course to be the company’s fastest-ever product to achieve $1 billion in sales. Summing up the company’s confident attitude, Su declared, “We’re playing to win and we think MI300 is a great product.”

AMD Stock Can Offer Exposure to a Fast-Growing Industry

Hardware for generative AI applications is in high demand. Investors may seek portfolio exposure to this high-conviction industry. Does AMD check all the right boxes, though?

The answer is complicated. AMD’s sales forecast disappointed some investors. Still, the company is confident in its ability to deliver strong sales for its AI processors. Therefore, in the final analysis, AMD stock gets a “B” grade and could be appropriate for a moderately sized position.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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