Should You Buy the Dip in AMD Stock?

Sitting at a market capitalization of $172.1 billion, Advanced Micro Devices (AMD), commonly known as AMD, is a semiconductor company that designs and manufactures processors, graphics cards, and other computing technologies. It specializes in high-performance computing, data center solutions, artificial intelligence (AI), and gaming hardware.

AMD delivered an impressive performance in 2024, achieving record revenue and significant growth in its data center and client segments. However, the stock is down 11.4% year-to-date, reflecting broader market volatility. Currently trading 44% below its 52-week high, AMD presents a compelling opportunity for investors looking to snap up a leading AI stock for cheap. 

2024 Was a Transformative Year for AMD

AMD ended 2024 on a high note with record-breaking revenue. The company’s advanced products, including the Ryzen series for CPUs and the Radeon line of GPUs, have garnered significant market share. 

In 2024, AMD saw total revenue jump of 14% to $25.8 billion, with adjusted earnings per share increasing by 25% to $3.31. Notably, the data center segment contributed 49% of total revenue, highlighting its growing strength in AI and enterprise computing. The segment surged 94% to $12.6 billion in 2024, driven by the adoption of 5th Gen EPYC Turin processors and strong demand for 4th Gen EPYC chips. Management emphasized that hyperscale cloud providers such as Amazon (AMZN), Google (GOOGL), Microsoft (MSFT), and Alibaba (BABA) expanded their AMD-based instances, with more than 1,000 EPYC-based cloud instances now available.

The client segment saw remarkable growth, with revenue increasing 52% year-over-year to a record $7.1 billion. AMD gained market share in desktop and mobile processors, with Ryzen chips leading global retail CPU sales. Furthermore, the company also secured a new strategic partnership with Dell (DELL). At CES 2025, AMD strengthened its position in AI-driven computing by unveiling 22 new mobile processors.

While the data center and client businesses grew, AMD’s gaming segment fell 58% due to lower console sales from Microsoft and Sony (SONY). However, management expects a rebound in 2025 as inventories begin to normalize. Furthermore, the introduction of Radeon 9000 series GPUs, which include enhanced ray tracing and AI-powered upscaling, could boost the segment. Meanwhile, the embedded segment, which fell 33%, is expected to recover, thanks to strong momentum in aerospace and defense. AMD’s acquisition of ZT Systems is set to close in the first half of 2025. This move is intended to accelerate the deployment of Instinct accelerators in the data center market. Furthermore, its next-generation MI350 and MI400 GPUs are expected to drive the company’s growth in the coming quarters. 

AMD ended the year with a strong balance sheet, with $5.1 billion in cash, cash equivalents, and short-term investments, and $1.7 billion in total debt. The company repurchased 5.9 million shares and returned $862 million to shareholders, leaving $4.7 billion available under its share repurchase program. The company also had a $2.4 billion free cash flow balance, which should allow it to pay down debt, invest in product portfolio upgrades, and continue to return profits to shareholders.

With continued momentum in AI, cloud computing, and high-performance computing, the company is poised for another year of rapid growth in 2025. Looking ahead, AMD anticipates Q1 2025 revenue to be around $7.1 billion, plus or minus $300 million, representing a 30% year-over-year increase at the midpoint. Growth in the data center and client segments is expected to compensate for any decline in gaming and embedded segment revenues. In the Q4 earnings call, management stated that AMD will consolidate its client and gaming segments into a single reportable segment beginning in f2025, in line with its business management strategy.

AMD stock is currently trading at 22 times forward 2025 earnings, compared to the five-year historical average of 75.8x, making it a reasonable semiconductor stock to buy now.

What Does Wall Street Say About AMD Stock?

Overall, Wall Street rates AMD stock as a “Moderate Buy.” Of the 42 analysts that cover AMD, 28 rate it a “Strong Buy,” while one recommends a “Moderate Buy,” and 13 recommend a “Hold.” Wall Street sees potential upside of about 36% over the next 12 months, based on its average price target of $147.10. Furthermore, its high target sits at $225, indicating a potential price increase of 108% from current levels.