Advanced Micro Devices (AMD, Financial) recently reported quarterly earnings that surpassed expectations, with both earnings per share and revenue exceeding market forecasts. The company highlighted strong demand in its data center business, which saw a 57% year-over-year revenue increase and a 72% rise in operating profit. Despite macroeconomic challenges such as changing tariff policies and trade tensions, AMD's management remains optimistic about future performance. The company projects its data center business, driven by AI chip sales, could surpass $20 billion in revenue by fiscal year 2025.
AMD's stock, which peaked above $150 in 2021, is currently trading around $123, marking a 2% increase this year. Although AMD trails NVIDIA (NVDA) in the AI processor market, its expanding AI business is expected to improve profit margins and boost market confidence. Analysts predict that significant deals, including a $10 billion agreement with a Saudi AI startup, could push AMD's AI chip sales to $130-150 billion by 2025. AMD's pricing strategy and diverse customer base may help close the gap with NVIDIA's leading products.
In the CPU sector, Intel (INTC) remains a key competitor, but AMD's growing server market share supports a higher valuation multiple. The company also announced an additional $6 billion stock buyback plan, raising the total buyback authorization to $10 billion. This move aims to support the stock price if AI-driven growth continues amid macroeconomic uncertainties.
