Advanced Micro Devices (AMD) is expected to release its Q2 FY 2024 results at the end of July, with revenues expected to reach $5.73 billion, a 7% increase from last year, and earnings per share anticipated to be around 0.68, up 17% year-over-year. The company is likely to benefit from a growing PC market and increased demand for artificial intelligence chips. AMD’s CPU sales are expected to remain strong, driven by rising PC sales and the introduction of new processors like the AMD Ryzen 8000 Series. Additionally, AMD’s GPU sales are projected to expand significantly, driven by the demand for graphics processing units in AI-related workloads.
Furthermore, AMD’s server chips, such as the fourth generation of the AMD EPYC CPUs, could continue to gain market share over rival Intel, who has faced delays in transitioning to smaller, more advanced process nodes. The company has also launched new chips, such as the MI300X chip, targeted at large language model training and inference for generative AI workloads. With AMD previously guiding AI-related chip sales of at least $3.5 billion for 2024, the surge in demand for AI applications could result in even higher sales, driving the company’s profits higher. AMD has guided gross margins of 53% for the year, up about 100 basis points sequentially.
AMD stock has seen significant gains over the past year, rising 65% from early January 2021 to around $150. However, the stock’s performance has been volatile, with returns of 57% in 2021, -55% in 2022, and 128% in 2023. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023. Despite the volatility, the Trefis High Quality Portfolio, which consists of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk.
Looking ahead, the ongoing recovery in the PC market and the surge in demand from AI applications could justify AMD’s current valuation of about 44x consensus 2024 earnings. The company is valued at around $163 per share, about 8% above the current market price. As the macroeconomic environment remains uncertain with high oil prices and elevated interest rates, it is unclear whether AMD will outperform or underperform the S&P 500 over the next 12 months. The company’s Q2 results will provide more insight into its performance and growth potential.
Overall, AMD is poised to benefit from the growing demand for PC processors and AI chips, driving revenue and earnings growth in Q2 FY 2024. As the company continues to innovate and expand its product offerings, investors will be watching closely to see if AMD can sustain its growth momentum and outperform the market in the coming months.
