Share prices of Advanced Micro Devices (NASDAQ: AMD) have climbed 454% over the last five years. An investment of $10,000 in AMD back 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 pace over the next five years?
This leading semiconductor continues to gain market share against Intel in the central processing unit (CPU) market, but it’s targeting other opportunities in artificial intelligence (AI) that could lead to another great run for shareholders over the next five years.
Why buy AMD stock?
At this point in 2019, AMD was executing against the growth strategy it outlined for 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 graphics processing units (GPUs), that generated higher margins. It was also talking about going after the CPU server market that was dominated by Intel.
By 2019, AMD’s margins, revenue, and earnings were on an upward trajectory, and it should see more growth.
However, AMD’s revenue grew just 2% year over year in the first quarter, weighed down by weak demand for gaming GPUs and weak sales in other markets. These segments could see a recovery within the next year.
AMD stock currently trades about 32% off its previous peak, and it could be a timely entry point to buy shares. The opportunity in the data center market is looking tremendous, as revenue soared 80% year over year in Q1.
AI is opening more markets to sell chips, which is helping to fuel AMD’s data center growth. AI at the edge, where processing is done on devices and local servers closer to the user, is a large opportunity that could drive robust chip demand across more devices.
Growth expectations are increasing, which makes the recent pullback a great opportunity to buy shares.
Should you invest $1,000 in Advanced Micro Devices right now?
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John Ballard has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
If You’d Invested $10,000 in Advanced Micro Devices Stock 5 Years Ago, Here’s How Much You’d Have Today was originally published by The Motley Fool
