"Is Advanced Micro Devices, Inc. (AMD) the Best Growth Stock Under $100 to Buy Now?"

In the ever-evolving world of semiconductor stocks, one name that has consistently caught the eye of investors is advanced micro devices, Inc. (AMD). With a strategic focus on AI and high-performance computing, amd has positioned itself as a formidable player in the tech industry. But is it the best growth stock under $100 to buy now? Let's dive deep into the numbers and the strategic moves that make AMD a compelling investment.



Financial Performance: A Record-Breaking Year

AMD's financial results for 2024 are nothing short of impressive. The company reported record revenue of $25.8 billion for the full year, with a gross margin of 49% on a GAAP basis and 53% on a non-GAAP basis. This is a significant increase from previous years and indicates strong profitability. The operating income for the full year was $1.9 billion on a GAAP basis and $6.1 billion on a non-GAAP basis, while the net income was $1.6 billion on a GAAP basis and $5.4 billion on a non-GAAP basis. The diluted earnings per share for the full year was $1.00 on a GAAP basis and $3.31 on a non-GAAP basis. These numbers are a testament to AMD's ability to generate strong profits and maintain high profitability.



Segment Performance: Data Center and Client Segments Shine

AMD's Data Center segment revenue for the full year 2024 was a record $12.6 billion, an increase of 94% compared to the prior year. This growth was driven by the strong demand for AMD's EPYC processors and Instinct accelerators. The Client segment revenue for the full year 2024 was a record $7.1 billion, up 52% compared to the prior year, due to strong demand for AMD Ryzen processors in desktop and mobile. These segments have been the driving force behind AMD's growth, and their continued success is a positive indicator for the company's future.

Strategic Focus on AI and High-Performance Computing

AMD's strategic focus on AI and high-performance computing is evident through its partnerships and product releases. The company has formed strategic partnerships with major technology companies to deliver highly performant AI infrastructure at scale. For instance, IBM plans to deploy AMD Instinct MI300X accelerators to power generative AI and HPC applications on IBM Cloud. Similarly, Vultr and AMD have collaborated to leverage AMD Instinct MI300X accelerators and AMD ROCm open software to power Vultr's cloud infrastructure for enterprise AI development and deployment. These partnerships not only expand AMD's market reach but also enhance its reputation as a leader in AI infrastructure.

Product Releases and Enhancements

AMD has released new processors and software enhancements that cater to the growing demand for high-performance and adaptive computing. The release of ROCm 6.3 with numerous performance enhancements enabling faster inferencing on AMD Instinct accelerators is a clear example. Additionally, the introduction of AMD Ryzen AI Max and Ryzen AI Max PRO Series processors, which deliver workstation-level performance and next-gen AI performance for gaming, content creation, and complex AI-accelerated workloads, positions AMD at the forefront of consumer and commercial AI PC markets.

Potential Risks and Challenges

While AMD's financial performance and strategic focus on AI and high-performance computing are impressive, the company faces several potential risks and challenges. One significant challenge is the decrease in semi-custom revenue, which has led to a decline in the Gaming segment's revenue. For instance, "Gaming segment revenue in the quarter was $563 million, down 59% year-over-year, primarily due to a decrease in semi-custom revenue." This trend is also reflected in the full-year 2024 data, where "Gaming segment revenue was $2.6 billion, down 58% compared to the prior year, primarily due to a decrease in semi-custom revenue."

Another challenge is the mixed end market demand in the Embedded segment, which has resulted in a decrease in revenue. For example, "Embedded segment revenue in the quarter was $923 million, down 13% year-over-year, as end market demand continues to be mixed." This trend is also evident in the full-year 2024 data, where "Embedded segment revenue was $3.6 billion, down 33% from the prior year, primarily due to customers normalizing their inventory levels."

Addressing Challenges

To address these challenges and ensure sustained growth, AMD is investing aggressively in AI and innovation. As stated by AMD EVP, CFO, and Treasurer Jean Hu, "We closed 2024 with a strong fourth quarter, delivering record revenue up 24% year-over-year, and accelerated earnings expansion while investing aggressively in AI and innovation to position us for long-term growth and value creation." AMD is also expanding its partnerships to deliver highly performant AI infrastructure at scale. For example, IBM announced plans to deploy AMD Instinct MI300X accelerators to power generative AI and HPC applications on IBM Cloud. Additionally, AMD is accelerating its AI software roadmap to deliver a robust open AI stack for the ecosystem. For instance, "AMD released ROCm 6.3 with numerous performance enhancements enabling faster inferencing on AMD Instinct accelerators as well as additional compiler tools and libraries." These strategic investments and partnerships are aimed at positioning AMD for continued growth in the AI and high-performance computing markets.

Conclusion

In conclusion, AMD's strategic focus on AI and high-performance computing, as evidenced by its partnerships and product releases, positions the company for future growth and innovation. While the company faces potential risks and challenges, its strong financial performance and aggressive investments in AI and innovation make it a compelling investment. With a stock price under $100, AMD is a growth stock that investors should consider adding to their portfolios.