Advanced Micro Devices (NASDAQ:AMD) has been one of the worst-performing semiconductor stocks and is down 43.58% in the past year. It has been declining continuously since hitting its peak in March 2024. That’s while most of its AI peers have rallied, up until recently at least. Now as the broader AI industry declines sharply and AMD also falls below $100, should you finally buy the stock? Here’s what you need to know:
AMD is now trading at 21 times forward earnings, which is pretty cheap for an AI name. However, AMD is often compared to Nvidia (NASDAQ:NVDA), which has performed flawlessly over the past two years. When you go deeper into the comparison to see that NVDA itself trades at less than 27 times forward earnings, you’re unlikely to have money left to buy the dip on AMD stock.
A rising tide could lift both boats in the long run. If Wall Street holds up the premium on AMD, it should deliver some juicy returns over the years.
It’s a pretty cyclical stock, but AMD has traded well above 21 times forward earnings historically on average.
No one knows when AMD stock is going to reach the bottom of the current cycle, but considering even the lowest price target is above its current price, that’s a good sign that shares could be bottoming out soon.
The comparison with Nvidia will keep some investors away, but unless the entire AI narrative falls apart over the next two years, you’re unlikely to be disappointed by AMD stock. Moreover, the AI industry seems to be shifting towards cost efficiency and inference, and this is something AMD does much better and can compete with Nvidia.
The AI inference market is projected to grow from $106.15 billion in 2025 to $254.98 billion by 2030.
All things considered, AMD is a long-term buy.
