Advanced Micro Devices (NASDAQ: AMD) seemed to fall out of favor with Wall Street in the first half of 2024, with its stock down 8% year to date. For reference, chip rival Nvidia‘s stock increased 113% in the same period. Mediocre earnings suggested AMD had yet to make significant headway in artificial intelligence (AI), and a general pullback on tech stocks fueled the declines.
However, AMD posted its second quarter of 2024 earnings on July 30, which finally saw the chipmaker gaining in the budding industry. The company’s AI-focused data center segment delivered record growth for the period alongside a sales boost in its central processing unit (CPU) division.
As a result, AMD’s stock is an increasingly attractive investment. The company boasts a long growth history, with its shares up close to 5,000% over the last decade. Meanwhile, revenue and operating income have soared 312% and 169%, respectively. AMD is only just getting started in AI and could see major gains as it expands in the coming years.
So, here’s the ultimate growth stock to buy with $10,000 right now.
AMD: A Hidden Gem
AMD and Nvidia are often compared; both are leading competitors in the chip market. These companies collectively account for nearly the entire discrete graphics processing unit (GPU) sector and have similar dominance in AI GPUs. However, their businesses are at vastly different stages of development, illustrated by AMD’s market cap at $221 billion and Nvidia’s currently at $2.6 trillion.
The difference could indicate massive growth potential for AMD as it continues to make headway in artificial intelligence. Recent earnings show AMD doing just that. In Q2 2024, the company’s data center segment posted revenue gains of 115% year over year. Meanwhile, operating income soared 405% to $743 million. Total revenue for the quarter increased by 9% despite a 59% decline in gaming revenue.
The Gaming Frontier
Before interest in AI rose, AMD was primarily known for its role in gaming. The company continues to profit from this sector thanks to increased CPU sales. Yet, its gaming division, including income from GPU and semi-custom chip sales, has been on a downward trend. Some of AMD’s biggest semi-custom customers include Sony and Microsoft, which use these chips to power game consoles such as the PlayStation 5 and Xbox Series X|S.
A mid-generation console refresh could be just around the corner, with Sony reportedly working on a PlayStation 5 Pro and Microsoft likely to follow suit. New consoles would likely boost AMD’s semi-custom chip sales and its gaming segment. Along with positive growth from AI and CPUs, AMD has become a well-rounded business worth investing in.
The Value Proposition
AMD struggled to gain investors’ support for much of this year as it worked to catch up in AI. However, recent quarterly results have improved its value, trading at one of its best values in months. In addition to massive potential in AI and encouraging earnings, AMD is an attractive stock to buy and hold long-term.
Smart Investing Decision?
The Motley Fool Stock Advisor analyst team just identified the 10 best stocks for investors to buy now… and Advanced Micro Devices wasn’t one of them. Before you invest, consider when Nvidia made this list on April 15, 2005—$1,000 invested then would be worth $711,657 now. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio and two new stock picks each month. The service has consistently outperformed the market.