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2023 was an impressive year for the U.S. stock market. S&P500 And that Nasdaq Composite They recorded returns of 24.5% and 43.4%, respectively. Rising investor optimism on the back of easing inflation and a stronger-than-expected economy in the second half of 2023 played a big role in the rally. However, the increasing adoption of artificial intelligence (AI) in all sectors turns out to be the most prominent growth driver for the stock market in 2023.
According to Next Move Strategy Consulting, the global AI market is estimated to grow from $207.9 billion in 2023 to nearly $1.8 trillion in 2030. Naturally, many companies are vying to take advantage of this opportunity.Particular attention should be paid to major chip companies Advanced Micro Devices (NASDAQ: AMD)is working to make its presence felt in the ever-expanding field of AI.
Assuming you don’t need this money to pay bills or contingencies, here’s why AMD could prove to be the ultimate AI growth stock to buy for $500.
Data Center Market Opportunity
AMD’s fourth quarter 2023 results were mixed. Although the company’s sales and profits beat consensus estimates, a weak outlook for the first quarter of 2024 disappointed investors. After the company announced its fourth quarter results on January 31st, the stock price fell about 2.5% in one day, but has now almost fully recovered.
The data center business continues to be a bright spot for AMD, with record fourth-quarter sales of $2.3 billion, up 38% year-over-year. The company has seen strong demand for its 3rd and 4th generation Epyc server CPUs and data center GPUs across its cloud, enterprise and AI customers. His recently launched MI300 Instinct GPU also proves to be a close replacement. Nvidiasupplies its H100 chips in constrained cloud, enterprise, and supercomputing environments thanks to their outstanding performance, high memory bandwidth, and capacity.
AMD is focusing on expanding production of MI300 chips. The company has already built a strong partner ecosystem, including leading cloud service providers and equipment manufacturers, to ensure faster deployment of the MI300 chip.The company agreed microsoft, meta platformand oracle Deploy MI300 accelerators to power your cloud-based AI workloads.
AMD’s recently launched ROCm 6 software suite further improves the programming of MI300 chips. The company then now expects data center GPU sales (MI300 AI chip sales) to exceed his $3.5 billion in 2024, up from its previous revenue forecast of $2 billion. doing. However, many analysts believe this is conservative guidance and expect MI300 sales to be in the range of $5 billion to $8 billion in 2024.
AMD expects the data center AI accelerator market to reach a value of $400 billion by 2027. Even if the company were able to capture his 10% of this market, it would have a significant impact on its financial performance and stock price in the coming years.
Increased demand for AI-powered PCs
After declining unit sales over the past two years, Canalys expects PC market shipments to increase 8% year over year in 2024. On top of that, the PC refresh cycle is approaching and there is an urgent need to migrate to Windows 11 (as Microsoft will end support for Windows 10 in his 2020). (October 2025), increasing demand for AI-enabled PCs is also playing a major role in this recovery. IDC predicts that global AI PC shipments will increase from 60 million units in 2024 to 167 million units in 2027, which will account for almost 60% of global PC shipments. I expect it to reach.
With Ryzen processors optimized for AI workloads, AMD’s client division appears well positioned to capitalize on these trends. Currently, more than 90% of AI-enabled PCs on the market are equipped with his Ryzen processors. The company is also preparing to launch its next-generation Ryzen AI CPU Strix, which boasts high performance and energy efficiency.
While the AI PC tailwind may take some time to materialize, it remains a major long-term growth driver for AMD.
Improved margins
Combined with the increase in MI300 chips, AMD’s profit margins are expected to rise in the coming quarters as the business mix shifts towards the high-end data center market. Additionally, the company expects improvements in its embedded business unit to support profit growth in the second half of 2024.
evaluation
AMD currently trades at 12.5x trailing 12-month sales, significantly higher than its five-year average valuation of 8.2x. However, this valuation pales in comparison to the nearly 40x price-to-sales ratio of Nvidia, AMD’s main competitor in the AI space.
Therefore, given AMD’s focus on capturing a share of the rapidly expanding AI market and increasing profitability, it is likely that retail investors will want to take at least a small position in this stock, even if current price levels rise. It makes sense to acquire it.
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Manali Pradhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
The Ultimate Artificial Intelligence (AI) Growth Stocks for $500 was originally published by The Motley Fool.
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