AMD: A Dip Worth Considering

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Advanced Micro Devices (AMD 3.93%) recently reported numbers that, on the surface, looked rather splendid. A good bit of revenue growth, earnings heading in the right direction, all very encouraging. Then the stock price did this peculiar thing – it rather promptly shed about a fifth of its value. Markets, eh? Always keeping you on your toes. A perfectly reasonable question arises: is this a moment to perhaps, shall we say, accumulate some shares? I’ve been giving it some thought, and here’s why I’m leaning towards a cautiously optimistic “yes.”

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The Data Center: From Potential to… Actually Happening

AMD projected around $9.8 billion in revenue for the first quarter, give or take a few hundred million – which, in the grand scheme of things, isn’t a vast sum, but then again, I’m not the one doing the accounting. There’s a seasonal dip happening, naturally. People tend to buy fewer computers after the holidays – a fact that seems intuitively obvious, yet still manages to surprise some analysts. But the real story isn’t in the usual suspects; it’s in the data centers.

AMD’s data center business, you see, appears to be at what they politely call an “inflection point.” I rather like that phrase. It sounds like a turning of a page in a particularly complicated instruction manual. What it means, in plain English, is that it’s actually starting to deliver. And despite a bit of a kerfuffle regarding trade policies with China – a situation that, let’s be honest, is never entirely straightforward – things are looking promising. Specifically, their MI450 GPU is expected to ramp up later this year. And, crucially, they don’t anticipate any supply chain hiccups getting in the way. Which, in this day and age, is a small miracle.

They’re projecting over 60% annual growth in data centers over the next few years. That’s a rather substantial number. The market’s initial reaction to slightly lighter guidance for Q1 seems, to me at least, a bit… enthusiastic in its pessimism. It’s as if everyone collectively decided to throw the baby out with the bathwater.

CPUs: Quietly Getting the Job Done

While everyone is busy gazing at the shiny new GPUs, AMD’s CPU business is, rather quietly, continuing to make a handsome profit. In the last quarter, they saw a 34% jump in client revenue – a record, apparently. And server CPU sales are booming, both to the cloud giants and to more traditional enterprise customers. They ended the year with their highest-ever market share in servers. It’s a bit like discovering a hidden room in a house you thought you knew well.

KeyBanc analysts, those ever-watchful sentinels of the market, recently noted that AMD’s Turin CPUs are practically sold out for 2026. Apparently, demand is surging, fueled by the relentless expansion of artificial intelligence infrastructure. Amazon, Google (Alphabet), and Microsoft are all snapping them up. It’s a bit like watching a particularly enthusiastic game of digital dominoes.

Valuation: A Reset, Not a Reckoning

Even after the recent drop, AMD isn’t exactly cheap. Trading at 38 times forward earnings isn’t something to dismiss lightly. Calling it a “value stock” would be… optimistic. But the sell-off has, at least, brought things back down to earth a bit. It’s a valuation reset, if you will. And when you consider the company’s growth prospects, it starts to look rather more attractive.

The price-to-earnings-to-growth (PEG) ratio of 0.52 – a number calculated by some very clever people using projections of future earnings – underscores this point. It suggests that the stock is reasonably priced given its growth potential. Which, in the often-fickle world of stock markets, is a reassuring thought.

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2026-02-06 11:02