Is Now the Time to Buy AMD Stock Near Its 52-Week Low?

This year, amidst the buzz surrounding the tech sector and advancements in artificial intelligence (AI), one stock that hasn't performed as expected is Advanced Micro Devices (AMD). As of Monday, the shares of this chipmaker were down 15% year-to-date, and the stock is approaching its 52-week low.

Given the current situation, is it a good time to consider investing in AMD?

Why Isn't AMD Stock Thriving in 2024?

When compared to its peer Nvidia, which has enjoyed remarkable success and is now among the top three most valuable companies globally, AMD's performance seems lackluster. Nvidia's market capitalization stands at an impressive $3.2 trillion, which is over 16 times greater than AMD's $200 billion market cap.

Currently, AMD's stock is trading at more than 110 times its trailing earnings. This high valuation is a concern for many investors. Additionally, AMD's recent revenue growth rate has been modest, especially when compared to Nvidia's impressive growth.

Thus, while tech giants benefit significantly from AI-driven demand, AMD's performance has lagged. In order to regain the interest of growth-focused investors, AMD needs a compelling catalyst.

On the positive side, AMD claims that it is set for record revenues in 2024 and is experiencing significant growth across multiple sectors of its business. However, investors may remain skeptical considering the substantial growth reported by other tech firms this year.

Interestingly, AMD anticipates a faster growth rate by the fourth quarter. Management projects sales around $7.5 billion, which would mark a 22% increase from the same period last year.

A New Chip That Could Impact AMD's Future

AMD is vigorously entering the AI chip market, recognizing the opportunity to capture market share from Nvidia. Companies are increasingly looking for more affordable chip options or attempting to diversify their supply chains to reduce reliance on a single manufacturer.

Recently, AMD launched the MI325X chip, which it claims is 30% faster than Nvidia's H200. If these claims hold true, this new chip could create competition for the industry leader, providing AMD with the potential for substantial revenue growth and possibly lifting its stock price in 2025.

Should You Consider Buying AMD Stock Right Now?

Despite poor performance in 2024, AMD might actually be an underrated stock worth holding onto in the upcoming year. With the introduction of its new chip to customers and expectations of increased growth rates, the conditions seem favorable for better stock performance in 2025.

Although AMD's stock may appear expensive based on its trailing metrics, it is trading at a forward price-to-earnings ratio of 25, according to analysts' consensus outlook. This makes it a more appealing option for long-term investors. Given AMD's potential in the AI chip sector, it could be one of the more promising stocks to invest in right now as it seems to be flying under the radar, which may prove to be a mistake for cautious investors.

AMD, Stocks, Investment