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Advanced Micro Devices Rises 18% in a Month: Buy or Hold the Stock?
ZACKSยท 2025-08-12 17:26
Core Viewpoint - Advanced Micro Devices (AMD) has experienced a significant share price increase of 17.8% over the past month, outperforming both the broader Computer and Technology sector and its closest competitor, NVIDIA [1][9]. Financial Performance - AMD's second-quarter 2025 results were negatively impacted by U.S. export controls on MI308 sales to China, resulting in an $800 million inventory write-down [2]. - The gross margin for Q2 2025 was reported at 43%, a decline from 53% in the same quarter the previous year, while the operating margin fell to 12% from 22% year-over-year due to inventory and related charges [3]. - For Q3 2025, AMD expects revenues to be approximately $8.7 billion (+/- $300 million), indicating a year-over-year growth of 28% at the midpoint [7][10]. Revenue Guidance - Sequentially, AMD anticipates a revenue growth of approximately 13%, driven by strong double-digit growth in the Data Center segment, particularly with the ramp-up of AMD Instinct MI350 series GPU products [8]. - The Zacks Consensus Estimate for Q3 2025 revenues is pegged at $8.72 billion, suggesting a 27.9% increase from the previous year [10]. AI Market Expansion - AMD is expanding its AI market presence with the introduction of the MI350 GPUs and a comprehensive AI platform, showcasing significant generational AI compute gains [12]. - The company has launched over 100 new AMD-powered cloud instances in Q2, with strong demand from hyperscalers [11]. - Strategic partnerships with major companies like Meta Platforms, OpenAI, Microsoft, and Oracle are enhancing AMD's role in powering next-generation AI workloads [13][14]. Competitive Landscape - Despite AMD's expanding portfolio, it faces stiff competition from NVIDIA, which has seen substantial growth in its Data Center revenues driven by demand for generative AI and large language models [15][16]. - AMD's stock is currently considered overvalued, with a forward 12-month Price/Sales ratio of 7.71X compared to the industry's 3.72X [17]. Conclusion - While AMD's expanding portfolio and partnerships are expected to drive top-line growth, near-term prospects are clouded by macroeconomic uncertainties and competition, particularly from NVIDIA in the cloud data center and AI chip markets [20].