This AMD Stock Forecast article was written by Milana Papadopoulou – Financial Analyst at I Know First.

Highlights

• AMD faces strong competition from NVIDIA and Intel
• Technical Indicators suggest a bearish short-term outlook
• AMD’s innovation in AI and servers market presents growth potential in the long term

AMD Stock Forecast: A Key Player in a Shifting Market

Advanced Micro Devices (NASDAQ: AMD) has been one of the most closely watched semiconductor stocks. Known for its high-performance CPUs and GPUs, AMD has positioned itself as a key player in sectors ranging from gaming to artificial intelligence and data centres.

AMD faces both opportunities and challenges as the semiconductor market experiences rapid shifts. The company’s recent advancements in AI-driven chips, its rivalry with NVIDIA and Intel, and macroeconomic factors all play a role in shaping its future. Investors are particularly focused on AMD’s ability to capitalize on the AI boom, its growing presence in the server market, and its long-term revenue growth potential.

Revenue Streams

Advanced Micro Devices (AMD) has experienced strong revenue and profit growth in recent years. In 2024, AMD reported a record revenue of $25.8 billion, a 13.7% increase from the previous year, with a gross profit of $12.7 billion. This continues an upward trend from $9.7 billion in 2020 to $23.6 billion in 2022.

AMD’s revenue is divided into four key segments. The Data Center segment generated $6.0 billion (25% of total revenue), driven by demand for EPYC™ processors. The Client segment contributed $6.2 billion (26%), though it declined due to a weaker PC market. Gaming accounted for $6.8 billion (29%), fueled by strong sales of gaming GPUs and consoles. The Embedded segment surged to $4.6 billion (20%), largely due to Xilinx product integration.

Main Competitors

Advanced Micro Devices (AMD) operates in the highly competitive semiconductor industry, with several key rivals across its product segments. 

1. CPUs: Intel Corporation stands as AMD’s primary competitor, both companies striving to deliver high-performance processors for personal computers and data centres. 
2. GPUs: NVIDIA Corporation is a major adversary, with both firms aiming for dominance in gaming, professional visualisation, and artificial intelligence applications. 
3. Mobile and Embedded: companies like Qualcomm and ARM Holdings present competition in the mobile and embedded processor markets.

This competitive landscape drives AMD to continually innovate and enhance its product offerings to maintain and grow its market share. 

AMD vs NVIDIA: A Profitability Gap That Persists

Another pitfall of AMD has been the profitability metric. The semiconductor business is notorious for being cost-intensive, so cost management is one of the biggest factors that push firms forward. AMD’s management has been vocal about attempts to cut costs and increase productivity. The outcome speaks for itself: the gross as well as net profit margins have been steadily increasing. The gross profit margin has expanded from 39% in 2020 to around 47% in 2024. 

The firm holds an advantage over Intel in that regard; its attempts to capture fleeing market share have harmed margins. However, Intel has long been less of a competitor to AMD than NVIDIA. Unfortunately, in comparison to the latter firm, AMD’s efforts appear to be inferior. NVIDIA’s profit margins have also been steadily increasing and are significantly higher than those of AMD. The semiconductor giant boasts unparalleled 76% gross and 56% net margins. Moreover, NVIDIA has considerably less debt, both proportionally and in absolute terms, making the flow of earnings to shareholders even more impressive. 

Main Clients

Advanced Micro Devices serves a diverse clientele across various industries, with a significant portion of its revenue concentrated among a few key customers. Notably, five major clients, including Hewlett-Packard (HP), Microsoft, and Sony, collectively account for approximately 70% of the net revenue attributable to AMD’s Graphics and Visual Solutions segment. 

HP integrates AMD’s processors into its range of personal computers and laptops, while Microsoft and Sony utilize AMD’s semi-custom chips to power their gaming consoles, the Xbox and PlayStation series, respectively. 

DeepSeek-Instilled Uncertainty

The unveiling of China’s DeepSeek AI model has raised concerns for AMD’s stock, as the model’s software-driven efficiency could reduce reliance on high-end GPUs. DeepSeek’s claim of training its latest model for just $5.5 million—far lower than the hundreds of millions spent by OpenAI and other U.S. firms—suggests a shift from traditional AI hardware dependency.

Although AMD trails NVIDIA in the AI GPU space, it has been aggressively expanding with its MI300 series chips. Any slowdown in AI computing demand could impact AMD’s ability to gain market share and compete with NVIDIA. Additionally, AMD faces pressure in the server CPU market. While it has been gaining ground on Intel, the recent price cuts on Intel’s Granite Rapids chips could force AMD to adjust its pricing strategy, potentially impacting margins.

Stock Performance

The firm’s struggles to cope with competitive pressure have been reflected in its stock performance. In the last year, AMD’s stock dropped 36.71%. This figure is less than that of its peer, Intel(NASDAQ: INTC), which fell over 40%. However, when using other benchmarks, AMD’s performance is less impressive. 

AMD has underperformed significantly when compared with the Philadelphia Semiconductor Index(INDEXNASDAQ: SOX) [+13.04%] and the Vanguard Information Technology Index(NYSEARCA: VGT) [+24.07%]. Since AMD is aiming for dominance in the high-performing GPU market, these indices present a better benchmark. When compared with its biggest competitor NVIDIA(NASDAQ: NVDA), AMD’s position seems even more bleak. NVIDIA has surged 87.89%, and that figure is even despite the fall after DeepSeek. Moreover, the stock underperformed even compared to the S&P 500, which includes companies from the wider market, not only the fast-paced, supercharged technology sector. 

AMD Stock Forecast: Technical Indicators

AMD had some swings in trading volume in the last year. However, the majority of volume increases were accompanied by selloffs. The largest peak in volume in recent times was the consequence of the DeepSeek “panic” and pessimistic statements by the CEO.  The stock price has shown moderate volatility, as can be seen from its Average True Range Figure, and the volatility has also died down recently. The relative strength index is lingering around 40, which does not give a clear suggestion of the stock being definitively overbought or oversold.

AMD’s Double Exponential Moving Average is sloping downwards and is below the stock chart. That is a strong bearish indicator. Another indicator that supports a bearish prognosis is The Fractal Chaos Bands. The Bands are sloping downwards, and the stock price has crossed the lower bands a couple of times in the last month, which is a strong downward trend. The Chaos Bands are notorious for giving false indicators in times of great stock volatility, but since AMD’s stock has been on a stable trajectory, this limitation does not apply, and they do show a true bearish signal. All in all, technical indicators forecast AMD’s stock on a downward trajectory in the near future.

AMD Stock Forecast: Silver Lining

Despite initial concerns that DeepSeek’s software-driven AI model could reduce hardware dependency and impact GPU demand, recent developments suggest a more nuanced outlook for AMD. DeepSeek’s open-source approach has democratised AI development, enabling a broader range of applications and potentially increasing the overall demand for versatile hardware solutions. AMD has proactively engaged with this trend by releasing instructions for running DeepSeek R1 models on its Ryzen AI CPUs and Radeon GPUs, positioning itself to cater to developers and enterprises adopting these models.

In the server CPU market, AMD continues to challenge Intel with its EPYC processors. While Intel’s recent advancements have intensified competition, AMD’s commitment to innovation and performance keeps it well-positioned in the industry.

In summary, AMD’s active involvement in supporting emerging AI models like DeepSeek and its competitive server CPU offerings suggests potential resilience and growth opportunities, even amid evolving market dynamics.

AMD Stock Forecast: Conclusion

The technical analysis suggests that AMD’s stock is experiencing a downward trend. Thus, in the short term, the trend is likely bearish. However, its fundamental metrics, as well as intrinsic value, suggest that it has the potential for success. The company, of course, has been overshadowed by the success of its stellar peer NVIDIA, but I believe the stock trajectory could still be turned around, although the timing of that is uncertain. Therefore, I believe that it would be more correct to attribute AMD to the “Hold” category.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

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