AMD’s Stock Surges as Chipmaker Prepares to Challenge Nvidia

Advanced Micro Devices  (AMD) is the IBD Stock of the Day for Wednesday, as AMD stock is attempting a breakout from a small handle. AMD shares have gained more than 90% this year as the chipmaker positions itself in the growing artificial intelligence market.

The Santa Clara, Calif.-based AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. But the firm is also a challenger to Nvidia (NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.

AMD is targeting the white-hot market for AI chips sparked by the rapid expansion of generative AI applications, an arena dominated by Nvidia. An upcoming event will officially launch new AI chips that AMD detailed earlier this year.

On the stock market today, AMD stock is up 3.5% at 123.29 in recent action. Shares have gained more than 20% since the firm’s Oct. 31 earnings report, forming a cup-with-handle base with a 122.11 buy point.

AMD Stock: Sales, Earnings Top Estimates

In its recent Q3 report, AMD said it earned an adjusted 70 cents per share on sales of $5.8 billion in the September quarter. Analysts polled by FactSet had expected AMD earnings of 68 cents a share on sales of $5.7 billion. Sales and earnings both rose 4% year over year.

The third-quarter report broke a streak of three quarters with year over year earnings declines for AMD.

Meanwhile, AMD’s guided for $6.1 billion in sales for the current quarter, short of analysts expectations of $6.39 billion. But the disappointment was tempered by AMD’s prediction of more than $2 billion in 2024 sales for its MI300 AI accelerators.

Unveiled in June, the MI300 accelerator is designed to compete against the advanced H100 chips sold by generative artificial intelligence market leader Nvidia. The product will officially launch Dec. 6.

“In the fourth quarter, we expect to see strong growth in data center and continued momentum in client, partially offset by lower sales in the gaming segment and additional softening of demand in the embedded markets,” Chief Financial Officer Jean Hu said in the Oct. 31 news release.

AI Push

The 2024 sales projection “supports the view that AMD is well-positioned to participate in the large and growing Gen AI compute market,” wrote Goldman Sachs analyst Toshiya Hari in a Nov. 1 client note.

Meanwhile, NVDA’s booming business selling chips for generative AI has powered its stock to 230% gains this year, the best performance in the S&P 500. On Tuesday, Nvidia reported earnings that easily topped Wall Street’s lofty expectations. But NVDA stock was down about 2% in recent action.

A potential catalyst for AMD stock is coming up early next month. AMD is hosting an event on Dec. 6 called “Advancing AI” to officially launch its MI300 accelerators. The event will also “highlight the company’s growing momentum with AI hardware and software partners,” AMD said in a news release.

AMD Stock: Technical Ratings

AMD ranks third among 37 stocks in IBD’s fabless semiconductor industry group, according to IBD Stock Checkup. NVDA is the top stock in the group.

Further, AMD stock has an IBD Relative Strength Rating of 94 out of 99. The Relative Strength Rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.

AMD stock carries an IBD Composite Rating of 91 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.

Further, AMD stock is on the IBD Tech Leaders list.

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