Stock Story -
What Happened: Shares of computer processor maker AMD (NASDAQ:AMD) fell 7.4% in the pre-market session after the company provided fourth-quarter results with revenue guidance for the next quarter falling below Wall Street's expectations.
Specifically, the Data Center segment is expected to see flat sequential growth with "the seasonal decline in server sales offset by strong Data Center GPU ramp." Management provided additional color on the server market during the earnings call, "So going into 2024, I would say the traditional server market is probably still mixed, especially into the first half of the year. There's still some cloud optimization going on, as well as sort of enterprise being a little bit cautious..."
Despite this uncertainty, there were some positive points during the quarter. Revenue growth in the Data Center and Client segments more than offset declines in Gaming and Embedded units, leading to a slight topline beat. On the AI front, management hesitated to provide market share projections, suggesting it is still early days. However, it reiterated the market estimate for the Data Center AI accelerator business growing to approximately $400 billion in 2027. In addition, the company highlighted its production of AI GPUs (MI300X) to meet growing demand from major players like Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and Meta. With the AI GPU business expected to surpass $3.5 billion in 2024, there's certainly momentum in this area.
Overall, it was a mixed quarter for the company, which likely didn't deliver the level of optimism expected by the market, especially considering the growing wave of investors excited about the new AI prospects and expecting AMD to be a top player in the GPU market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy AMD? Find out by reading the original article on StockStory.
What is the market telling us: AMD's shares are very volatile and over the last year have had 24 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago, when the company gained 5.6% on the news that NewStreet Research analyst Pierre Ferragu upgraded the stock's rating from Neutral to Buy and assigned a price target of $215. The price target represents a potential 20% upside from where shares traded when the upgrade was announced. The analyst added, "AMD is the best way to play datacenter AI chips if the company's forecast of a $400 billion addressable market by 2027 bears out."
As a reminder, on December 6, 223, AMD held a product event. There were endorsements for its MI300 product from Microsoft, Oracle, Meta, and others, and AMD now sees the data center AI chip market at $400bn in 2027, up significantly from its forecast of $150bn just last year.
AMD is up 19% since the beginning of the year, and at $164.90 per share it is trading close to its 52-week high of $180.33 from January 2024. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $6,755.
