AMD Stock (NASDAQ: AMD) – Competitor Creating Shadows

Holders of Advanced Micro Devices stock (NASDAQ:AMD) would be expected to be in a buoyant mood when considering gains of 34.22% over 1 year, and 448% over 5 years. Why then are some looking on the stock performance with mixed emotions? A competitor that is taking markets by storm, and creating shadows, Nvidia (NASDAQ:NVDA).

While AMD's stock has seen a commendable rise of nearly 16% year to date, Nvidia's stock has catapulted more than ten times the level with a staggering 173% in the same period.

AMD's performance, although strong, pales in comparison to Nvidia over the past five years. Nvidia's stocks have seen an eye-watering increase of 3,459%, approximately eight times larger than AMD's increase in the same timeframe.

Such a discrepancy foregrounds the competitive advantage Nvidia has carved out in the tech market, particularly in areas of rapid growth like AI and gaming. This is not exclusive to AMD however, as many other companies also pale in comparison.

Analysts over at Morgan Stanley have expressed reservations regarding AMD's future quarters, notably concerning the expected contributions from its AI business. Their concerns are quantified by a glaring $2 billion gap between the projected AI chip sales for AMD in 2024 and the market's expectations. This significant rift underscores the challenges AMD faces in meeting investor anticipations and maintaining its market momentum.

Despite the downgrade and concerns, AMD's AI accelerators, especially the MI300 series, have shown robust performance. Generated orders value up to $3.5 billion with $1 billion already realised in revenue. Further forecasts suggest the potential of reaching an annual run rate of $2 billion by year's end.

This demonstrates the substantial demand for AMD’s AI products, indicating growth in an industry that is becoming increasingly crucial for technological advancement.

While Morgan Stanley's downgrade weighs on AMD's outlook, a majority of analysts remain positive.

Out of 50 analysts covering AMD, 40 maintain a “Buy” rating with a target price aiming at $195. This optimism suggests a consensus that, despite short-term headwinds, AMD's overarching trajectory in the semiconductor industry remains strong.

AMD's current landscape in the stock market illustrates the company's struggle to keep pace with its competitor Nvidia. Nevertheless, the successes of AMD's AI accelerators and the maintained confidence of a substantial number of analysts provide a cautiously optimistic view for the company's future.

AMD's growth story, particularly in AI chip sales, will be an interesting development to monitor as it continues to unfold in this fast-evolving sector.