Stock prices of Advanced Micro Devices (NASDAQ:AMD) have increased 454% in the last five years. A $10,000 investment in AMD in June 2019 would be worth $55,410 today. That’s a lot of growth in a relatively short time. Can AMD continue to grow at this rate over the next five years?
This leading semiconductor continues to gain market share against Intel in the central processing unit (CPU) market, but is targeting other opportunities in artificial intelligence (AI) that could lead to another big rush for shareholders over the next five years.
Why buy AMD shares?
At this point in 2019, AMD was executing the growth strategy it outlined to investors at its Financial Analyst Day in May 2017. AMD was targeting higher gross margin as it shifted more sales to high-end chips, such as units graphics processing processor (GPU). ), which generated higher margins. There was also talk of going after the CPU server market that was dominated by Intel.
For 2019, AMD’s margins, revenues, and profits were on an upward trajectory and should see further growth.
However, AMD’s revenue grew just 2% year over year in the first quarter, hurt by weak demand for gaming GPUs and weak sales in other markets. These segments could see a recovery over the next year.
AMD stock is currently trading around 32% below its previous peak and could be an opportune entry point to buy shares. The opportunity in the data center market looks tremendous, as revenue soared 80% year over year in the first quarter.
AI is opening up more markets to sell chips, which is helping drive the growth of AMD’s data centers. AI at the edge, where processing is done on local devices and servers closer to the user, is a big opportunity that could drive strong demand for chips in more devices.
Growth expectations are rising, making the recent pullback a great opportunity to buy the stock.
Should I invest $1000 in advanced microdevices right now?
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John Ballard has positions at Advanced Micro Devices. The Motley Fool positions and recommends Advanced Micro Devices. The Motley Fool recommends Intel and recommends the following options: long $45 January 2025 calls on Intel and short $35 August 2024 calls on Intel. The Motley Fool has a disclosure policy.
If You Had Invested $10,000 In Advanced Microdevice Stocks 5 Years Ago, Here’s How Much You’d Have Today was originally published by The Motley Fool