Among investment opportunities in the field of artificial intelligence (AI), semiconductor stocks have become a leading choice. Nvidia: has been the most popular of the chip stocks for the past two years, and for good reason. The company’s graphics processing units (GPUs) play an important role in the generative development of artificial intelligence, and companies around the world can’t seem to get enough of Nvidia’s offerings.
While it remains a solid opportunity at the intersection of semiconductors and AI, I see another stock that looks like a better value.Below, I’m going to break down the current price action around it Advanced Micro Devices(NASDAQ: AMD). And I’ll explain why I think the company is well-positioned for years of steady growth despite a tough matchup with Nvidia.
The chart below shows the price movements of AMD and several leading semiconductor stocks, as well as: VanEck Semiconductor ETF In contrast to its peers, AMD shares have fallen significantly, and as of January 14, the stock is near a 52-week low.
Given how integral chips are to AI development, what’s driving AMD’s stock to sell off while its competition is seeing overwhelming investor support?
From what I can gather, the negative sentiment around AMD is growing at a modest 18% at the moment. It looks underwhelming when compared to Nvidia. I think investors are missing the forest for the trees.
Image source: Getty Images
While AMD’s overall revenue growth may seem muted when compared to the competition, it’s important to look at the details before jumping to conclusions. The company divides its revenue into four main categories: data center, client, gaming and embedded.
At the moment, the gaming and embedded segments of the company are not growing at all. Unfortunately, this lack of growth is cannibalizing the areas of the business that are thriving.According to the company’s latest financial report, data center operations grew 122% year over year; almost identical to Nvidia the GPU part of the data center.
Despite this impressive growth, the dram is traded a price/earnings-growth ratio (PEG) of just 0.3. This suggests that analysts may be missing how strong the company’s data center business is and therefore muting its growth estimates. Note that a stock with a PEG ratio below 1 usually implies that it is undervalued is
It’s going to be an interesting year for the chip space. Investors and Wall Street analysts are going to weigh in on all the possible stats surrounding Nvidia’s new Blackwell GPU, which is reportedly already sold out over the next 12 months. That’s good news for Nvidia for outwardly, but I think AMD has a big opportunity that is visible in the background.
In particular, this supply and demand dynamic presents an interesting opening for AMD in that the company can compete on price and offer an optimal solution when businesses simply cannot afford Nvidia’s GPUs.
A big windfall for AMD over the past year has been the adoption of MI300 accelerators by hyperscalers including: Oracle:, Microsoftand: Meta platforms. While each of these companies also relies heavily on Nvidia’s GPU architecture, they have taken steps to diversify their AI infrastructure by supplementing their respective Nvidia stacks with products developed by AMD.
Given that AMD already has a line of successor chips slated for release in 2025 and 2026, I think the company has a good chance to take advantage of continued demand in the semiconductor landscape by offering a number of alternatives to Nvidia’s product suite . all at a more reasonable price.
For me, investors should be laser-focused on the bullish trends around AMD’s data center GPU segment. If the company can profitably accelerate this particular part of its business, I think it’s only a matter of time before investors start to take notice of its scale and the stock can take off.
I see AMD as a compelling long-term opportunity for AI investors and believe that the current depressed price action makes now a profitable time to buy the stock.
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Randi Zuckerberg, former CMO and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Adam Spataco has positions in Meta Platforms, Microsoft and Nvidia The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, Nvidia, Oracle and Taiwan Semiconductor Manufacturing is Broadcom and offers the following options: Long January 2026 $395 Calls with Microsoft and Short January 2026 $405 Calls with Microsoft The Spotted Fool has a disclosure policy.
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