AMD Stock Analysis

Buy, Hold, or Sell in 2025?

Author

Portfolio Parrot
February 16, 2025

As Advanced Micro Devices (NASDAQ: AMD) navigates the dynamic semiconductor landscape in 2025, investors weigh the company's potential against market challenges. Here's a comprehensive look at the buy, hold, and sell cases for AMD stock.

Buy Case

  1. Strong AI and Data Center Growth: AMD generated over $5 billion in AI chip revenue in 2024, which is expected to reach tens of billions in the coming years1. The data centre segment saw a 94% year-over-year increase to $12.9 billion in 20242.

  2. Record-Breaking Revenue: AMD reported annual revenue of $25.8 billion for FY2024, a 14% increase over the previous year2.

  3. Analyst Optimism: The average price target for AMD is $182 by the end of 2025, representing a 46% increase from current levels1.

  4. Innovation Pipeline: AMD's upcoming MI350 GPU series could capture 15-20% of the AI training market by 20261.

Hold Case

  1. Valuation Concerns: AMD's stock price, with a P/E ratio of 113.1, already factors in significant growth expectations3.

  2. Competitive Pressures: AMD faces stiff competition from Nvidia, which holds a 90% market share in AI chips1.

  3. Mixed Segment Performance: While data center and client computing segments thrive, the gaming division faces significant headwinds2.

  4. Execution Risks: AMD must quadruple AI accelerator shipments in 2025 to meet its revenue targets3.

Sell Case

  1. Gaming Segment Decline: Gaming revenue declined 59% year over year to $563 million in Q4 2024, and full-year revenue was down 58% to $2.6 billion4.

  2. Data Center Revenue Miss: Despite strong growth, Q4 data centre sales of $3.86 billion missed analyst expectations of $4.12 billion2.

  3. Technical Analysis Concerns: AMD shares broke below the 200-day moving average at $118, potentially entering a bearish trend3.

  4. Market Volatility: Broader economic factors and potential slowdowns in tech spending could negatively impact AMD's growth prospects.

In conclusion, while AMD shows promising growth in AI and data centres, investors should consider the company's valuation, competitive landscape, and segment performance before making investment decisions.

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