The growth of various artificial intelligence (AI) stocks has flourished as more investors have embraced the technology’s possibilities. Notably, companies such as Nvidia and Palantir Technologies have significantly contributed to this AI expansion.
Still, it’s important to note that the growth spurt hasn’t been universal among AI stocks, and many of them have faced challenges along the way. However, as their unique strengths become increasingly evident, these types of stocks tend to prosper. Keeping this in mind, one promising AI stock seems poised for a resurgence in the second half of the year.
The comeback stock
It’s predicted that the technology sector, particularly Advanced Micro Devices (AMD), will bounce back in the latter part of 2025, despite its less-than-impressive performance in 2024. This might come as a surprise, considering its high of over $227 per share in March 2024, followed by a continuous decline.
Struggles persisted in the gaming and embedded sectors, causing concern for the company’s stock. As it became increasingly clear that AMD was lagging behind Nvidia in the AI accelerator market, investors grew even more wary. In early 2025, DeepSeek’s innovation of cheaper AI chips failed to lift spirits, as AMD’s stock dropped significantly, losing about two-thirds of its value over a 13-month span.
Nonetheless, April saw a closing low close to $78 per share amid investor apprehension regarding “Liberation Day,” which coincided with the Trump administration’s tariff plan revelation. Subsequently, the semiconductor stock regained strength together with the market and gained even more momentum on June 12, following AMD’s announcement of its upcoming MI400 GPU.
In the future, a cutting-edge chip will be integrated into a server rack named Helios, boosting AMD’s potential as a tougher rival to Nvidia in the market. This expectation has propelled AMD’s stocks, nearly doubling their value since April.
Improved financials
Furthermore, while its future financial projections indicate positive changes, they suggest that AMD’s difficulties in the embedded and gaming sectors may also see improvement.
In Q1 of 2025, embedded income experienced a minimal decrease of just 3% compared to the same quarter in the previous year, which is significantly less than the 33% drop seen in 2024. Moreover, while gaming revenue decreased by 30% in this quarter, it represented a substantial improvement compared to the steep 58% decline observed in Q1 of 2024.
To summarize, our first-quarter earnings this year totaled $7.4 billion, marking a significant 36% increase compared to the same period last year. Notably, revenue growth was even higher at 14% in the year 2024, indicating a noticeable improvement in performance. This substantial increase allowed us to significantly boost our net income. In fact, we made a profit of $709 million this quarter, which is considerably more than the $123 million profit we had in the same quarter last year.
Furthermore, even with notable advancements, the stock seems set to climb further during the latter part of the year, and it presently remains over 30% lower than its peak record value.
Despite having a high 116 P/E ratio based on past earnings, its forecasted P/E ratio of 40 might be considered a good deal given the significant revenue and profit growth seen in the last quarter. As investors eagerly await the launch of MI400, this should likely benefit AMD for the remainder of 2025 and beyond.
AMD in the second half of 2025
In the second half of 2025, AMD is anticipated to have a strong comeback, with continued financial growth and advancements in a crucial sector. It’s important to note that the company’s stock has faced difficulties due to investor concerns over its position in the AI accelerator market. Regrettably, this uncertainty has affected segments like gaming and embedded, which experienced a significant decline.
Despite being cyclical, the semiconductor sector is showing signs of recovery, particularly in the gaming and embedded segments. What’s more, the MI400 has the potential to strengthen AMD’s position in the AI accelerator market, as it strives to keep pace with Nvidia in this competitive arena.
To summarize, despite AMD’s P/E ratio suggesting a costly stock, its significantly lower projected earnings multiple could imply that it is an attractive investment given its growth rate. If AMD fails to hit new record highs this year, there are still solid reasons for optimism in the second half of 2025, as its future prospects appear increasingly promising.
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2025-07-20 04:43