We recently published a list of 10 Trending AI Stocks in October. Since Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 6th on the list, it deserves a deeper look.
Tom Lee, Fundstrat co-founder, while talking to CNBC in a latest program, explained his bullish case for the market and why he believes the S&P 500 is headed to close the year "well beyond" 5,700.
Lee said that he's inclined to buy "risks outright" as he believes more upward momentum would come for stocks after the election.
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BofA Securities reaffirmed Advanced Micro Devices, Inc. (NASDAQ:AMD) Buy rating ahead of the company's AI event on October 10.
BofA analysts, led by Vivek Arya, said their top AI picks remain Nvidia (NVDA) and Broadcom (AVGO). However, they maintained AMD's rating, highlighting the company's unique potential for CPU market share gains. AMD is well-positioned to take market share in the PC and server CPU sectors from Intel (INTC), which continues to face internal challenges and restructuring efforts.
The analysts also pointed to Advanced Micro Devices, Inc. (NASDAQ:AMD) potential to tap into the growing AI market. AMD estimates the total addressable market for AI accelerators will surpass $400 billion by 2027, a sector where Nvidia currently leads but continues to expand. The expanding market offers opportunities for alternative suppliers like AMD, particularly in the application-specific integrated circuit (ASIC) space.
Arya's team believes that upcoming AI roadmap updates (including the MI-325/250/400 series) and server CPU advancements (Zen-5-based Turin versus Intel's Granite Rapids) could reignite investor interest in AMD.
Despite these growth prospects, competition remains fierce. Investors expect AMD's AI sales to grow another 10% in 2024 to exceed $5 billion, with the potential to double year-over-year to $10 billion in 2025. However, the company still faces stiff competition from Nvidia, which holds over 80% of the AI market, and cost-effective custom ASICs from Broadcom and Marvell Technology (MRVL), which collectively control nearly 10%.
BofA analysts estimate Advanced Micro Devices, Inc. (NASDAQ:AMD) AI accelerator market share will remain at 5-7% for 2024-2026, well below its more than 20% share in consumer CPUs and gaming GPUs. But if AMD can carve out a 10% AI market share by 2026, it could add around $5 billion in sales, bringing potential earnings per share to $8-$9, up from current consensus estimates of $7.37.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
Overall, Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 6th on Insider Monkey's list titled 10 Trending AI Stocks in October. While we acknowledge the potential of Advanced Micro Devices, Inc. (NASDAQ:AMD), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.