Is Advanced Micro Devices Stock Slide Over?
Advanced Micro Devices (NASDAQ: AMD) stock slide may not be over, but it is nearing its end and setting up the market for a solid rebound that could quickly add 30% to the stock price. Technically speaking, AMD’s market is profoundly oversold and overextended, with stochastic oscillators in the low-end range on the daily, weekly, and monthly charts. The oversold condition results from a sentiment reset that repriced the outlook for AI influence on the business from an NVIDIA-like near-term boom to a longer-term, more sustainable growth pace supported by strength in edge computing and data centers.
In early March, the market for AMD is trading near a critical support level that aligns with lows set in October 2023, when the AI bubble was first inflating. No AI premium is attached to the stock at this level, and AI's influence on the business is robust. The data center and client segments are growing at hyper-paces, supported by client wins and penetration gains that point to continued strength in 2025.
While gaming continues to drag on the semiconductor business, it is expected to revert to growth in calendar 2025 and help sustain a nearly 30% CAGR through the decade's end. New advances, including the Radeon 9070 graphics cards, threaten NVIDIA’s gaming industry dominance. These cards have 16GB of memory, improved raytracing, and AI accelerators for enhancing gaming experiences. The takeaway is that this stock trades at less than 10x its 2030 earnings consensus and may easily exceed the figure.
Analysts' Sentiment Reset Weighs on AMD Stock Prices: Market Overreacts
The analyst's sentiment trends are a factor in AMD’s stock price decline but also highlight a market that has overreacted and overextended. The sentiment trend includes numerous price target reductions between February 2024 and February 2025, reducing the consensus estimate by 14%, which put the stock on MarketBeat’s list of Most Downgraded names. Still, the conviction remains firm in the Moderate Buy rating and expectation for a minimum double-digit upside; the consensus target forecasts a 55% upside, while the low-end target is 10%.
Analysts' activity following the Q4 release includes more price target reductions. Still, most align with the consensus and are offset by initiated targets above the consensus, several price target increases, and an upgrade that signals shifting sentiment and a heightened potential for market bottoming. Analysts' trends will support the market in this scenario and may become a tailwind for price action later in the year.
Unsurprisingly, institutional activity aligns with a market bottom in Q1 2025. The institutions own more than 70% of the stock, and their activity ramped to a two-year high in Q1. The balance of activity is buying, netting about $2.2 billion in shares in the first two months of the quarter, about 1.35% of the market cap with shares near $100.
AMD Builds Value for Investors With Fortress Balance Sheet
AMD's fortress balance sheet and increasingly strong financial position are among its attractions. The highlights from 2024 include a slight reduction in cash offset by increased receivables and inventory, increased current and total assets, and steady liability. Equity rose by 3%. Regarding leverage, it is very low, with long-term debt virtually non-existent and total liability running near 0.2x equity and 4x cash. The company hasn’t yet returned significant amounts of capital but may soon begin increasing its buyback activity or initiate a dividend like its competitor, NVIDIA.
Risks for AMD include increased and vigorous competition in its end markets, including NVIDIA. NVIDIA is also advancing gaming and data center technology and will not likely give up its leadership position soon. Its advantages include first-move strengths and a years-long head start on building its software ecosystem.
