Down 50%, Should You Buy AMD Stock on the Dip?

Core Insights - AMD stock has seen a significant decline of approximately 50% from its peak in early 2024, raising concerns among investors about its future performance [1] - Despite challenges, AMD's revenue and adjusted earnings are on the rise, indicating some positive aspects within the company [1] Group 1: Positive Aspects - AMD's core CPU business is thriving, with a 24.7% unit share and a 28.2% revenue share in the combined server and PC CPU markets in Q4 2024, marking a substantial increase over the past six years [2] - The EPYC server CPUs have gained popularity, and AMD's Ryzen CPUs are also seeing increased adoption, particularly due to Intel's recent product shortcomings [3] - The client segment revenue, which includes PC CPUs, surged by 58% year-over-year in Q4, while the data center segment revenue grew by 69%, driven by the success of EPYC chips [5] Group 2: Challenges and Concerns - AMD's AI accelerator revenue reached over $5 billion in 2024, but growth is expected to slow to "strong double-digit" percentages, indicating potential struggles in capturing market share from Nvidia [6][7] - The gaming segment experienced a significant revenue decline of 59% in Q4, primarily due to aging game consoles and challenges in the gaming GPU market, where AMD holds only a 10% market share [8][9] - The embedded segment, bolstered by the acquisition of Xilinx, saw a revenue drop of 13% in Q4 and 33% for the entire year of 2024, attributed to weak demand and high customer inventory levels [10] Group 3: Market Position and Valuation - AMD stock is currently trading at around 25 times the average analyst estimate for 2025 adjusted earnings per share, suggesting it is not overly priced but also not particularly attractive given the current circumstances [11][14] - The long-term growth outlook for AMD's AI chip business appears to be a significant concern, as the company is not growing fast enough to meet market demands [12] - Competition from Intel is expected to intensify, especially with a new CEO likely to implement aggressive strategies, which could impact AMD's market position [13]