AMD Stock Pullback: Is it Time to Buy?

Advanced Micro Devices (AMD) shares have cooled off after a strong run earlier this year due to concerns about valuation and the impact of US export restrictions to China. Despite a year-over-year decline in AI revenue in the data center business, AMD's long-term prospects remain intact. The company is entering the second half of the year with catalysts that could reaccelerate its growth, including the ramp of its Instinct MI350 series accelerators and strong sales of EPYC and Ryzen processors.

Advanced Micro Devices (AMD) shares have cooled off after a strong run earlier this year, as the market has grown cautious about the company's valuation and the impact of U.S. export restrictions to China. The latest earnings report added to the pain, with AMD reporting a year-over-year decline in artificial intelligence (AI) revenue in the data center business during the second quarter. Much of the weakness in AI revenue was due to the U.S. export ban, which cut into sales of the company’s MI308 accelerators in China [1].

Despite the softer quarter, AMD’s long-term prospects remain intact. The company is entering the second half of the year with catalysts that could reaccelerate its growth. The ramp of its Instinct MI350 series accelerators is expected to drive its data center AI revenue. At the same time, its EPYC server processors and Ryzen chips continue to gain share, giving the company multiple growth levers beyond data center AI [1].

AMD’s latest quarterly report reflects the strength of its diversified revenue model, with strong sales of EPYC and Ryzen processors driving growth despite headwinds in AI-related revenues. In the second quarter, AMD’s revenue surged 32% year-over-year to $7.7 billion, surpassing expectations. The data center segment increased 14% to $3.2 billion, driven by robust demand for the EPYC portfolio across cloud and enterprise workloads, as well as new use cases tied to AI [1].

Looking forward, AMD could deliver strong growth ahead in its server CPU business. Demand for both cloud and on-premise computing continues to expand as companies scale their digital operations. At the same time, AMD is steadily gaining market share, which strengthens its competitive position. Furthermore, the surge in AI is driving significant investment in general-purpose infrastructure and is likely to increase demand for server CPUs [1].

AMD’s data center AI business looks set for a strong rebound after a softer Q2. Moreover, management sees its AI data center revenue climbing into the tens of billions over time. Notably, AMD’s MI300 and MI325 accelerators gained traction last quarter, winning new deals. This progress paves the way for the upcoming MI350 series, designed to deliver high-performance AI computing at lower cost [1].

Analysts are cautiously optimistic about AMD stock and have a “Moderate Buy” consensus rating. However, note that challenges from export restrictions and product transitions are temporary, and AMD has strong growth catalysts that will drive future growth. With EPYC and Ryzen processors driving steady gains and the ramp of MI350 accelerators poised to reaccelerate AI revenue, AMD is well-positioned to capture expanding demand across data centers, PCs, and emerging AI applications [1].

References:
[1] https://finance.yahoo.com/news/amd-stock-cools-off-time-155254469.html
[2] https://www.ainvest.com/news/amd-strategic-position-ai-chip-market-wall-street-bullish-outlook-timely-investment-opportunity-valuation-dynamics-2508/