Recent market trends reveal a curious phenomenon – the bandwagon buying of stocks favored by U.S. politicians. This controversial strategy hinges on the premise that politicians possess unique insights due to their access to privileged information. This practice, while legal, must be reported to the public, shedding light on their investment moves.
One such stock capturing the attention of politicos like Michael McCaul, Josh Gottheimer, and Markwayne Mullin is AMD (NASDAQ: AMD). Politicians have collectively injected approximately $345,000 into AMD stock since December, with only $49,000 in sales, painting a lopsided picture that investors are closely monitoring.
A Broad Spectrum: AMD’s Diverse Product Portfolio
AMD, short for Advanced Micro Devices, is deeply entrenched in the computing sector, offering a vast array of products across multiple industries, from data centers to personal computers to embedded processors. This expansive reach makes AMD a formidable player, facing competition from all corners of the market.
One of AMD’s primary battlegrounds is the data center arena where it vies against industry stalwart Nvidia (NASDAQ: NVDA) for a piece of the lucrative artificial intelligence (AI) computing pie. However, AMD is significantly trailing in this race. While Nvidia’s data center revenue skyrocketed by a staggering 409% year over year, AMD’s growth stood at a modest 38% in Q4 FY 2023 and 80% in Q1 FY 2024. The disparity underscores AMD’s struggle to keep pace, with Nvidia firmly in the lead.
Performance Discrepancy: Is the Premium Justified?
Excluding the data center segment, which still exhibits robust demand despite product inferiority, AMD’s overall performance is lackluster.
| Segment | Quarterly Revenue | YOY Revenue Growth | QOQ Revenue Growth |
|---|---|---|---|
| Data Center | $2.34 billion | 80% | 2% |
| Client | $1.37 billion | 85% | (6%) |
| Gaming | $922 million | (48%) | (33%) |
| Embedded | $846 million | (46%) | (20%) |
The client division experienced significant growth, buoyed by the resurgence of the PC market following a pandemic-induced slump. Nonetheless, the gaming and embedded divisions grappled with plummeting revenues compared to the previous year, dampening AMD’s overall revenue uptick to a mere 2% in Q1. Earnings per share (EPS) barely inched up to $0.07, an improvement from the previous year’s $0.09 loss.
Future Prospects and Parting Thoughts
Wall Street remains cautiously optimistic about AMD’s future, with an average of 39 analysts forecasting a modest 12.5% revenue growth in 2024. However, this optimism pales in comparison to Nvidia’s meteoric rise in the market.
Despite the influx of politicians investing in AMD, the stock’s premium valuation compared to Nvidia on a forward price-to-earnings (P/E) basis gives pause for concern. With Nvidia’s sustained dominance and focused business approach, AMD finds itself playing second fiddle in the GPU sector.