AMD Stock Worth A 27% Return If It Reclaims Recent Record Highs

Nvidia Corporation NVDA isn’t the only artificial intelligence chip stock in town, and Advanced Micro Devices AMD has been striving to prove this over the past weeks.

Despite announcements on new product launches and partnerships, the shares haven’t responded — at least, not in the way you’d expect during one of the biggest technology stock rallies of the past two decades.

On Friday, March 8, for example: AMD stock had closed the previous session at $211.38. It opened on the Friday at $213.41, before rallying 7.5% to a high of $227.30. However, the shares then tumbled all the way down to $205.6, before closing out at $207.39 — down 1.9% on the day.

To explain such volatility — a near 9% peak through move in a single day — isn’t easy. On Thursday, March 8, Benzinga reported some unusually bearish action in the options market on AMD. But it may have just been profit-taking.

Over the next few sessions, AMD shares finally fell as low as $174 on Wednesday this week, down 23.5% from that $227.30 high.

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Still Liked By Institutions

However, few institutional investors rate AMD as a sale. Its shares, thanks to a strong AI narrative, have been moving higher in lockstep with other AI-related stocks and AMD is up 21.4% in 2024, despite its recent downturn.

To analysts at Zacks, it’s all about the growth outlook. AMD shares are trading at 9x next year’s sales forecast of $31 billion, while Nvidia enjoys 18x.

“This valuation “gap” was always my thesis for owning the GPU juggernaut and now I think it can go above 10X,” said analyst Kevin Cook.

He added: “Since Nvidia won’t be able to meet all the GPU demand, and AMD keeps innovating for similar customers, we should see this back to new highs this year.”

Cook concluded: “This pullback to the Jan-Feb support zone around $175 is our chance to get in while Micron Technology Inc. MU is exploding higher on their growth outlook.”

Indeed, Micron, soared 14% on Thursday this week after reporting revenues, earnings and margins well over Wall Street estimates.

The company said of its results: “Our pre-eminent product portfolio positions us well to deliver a strong fiscal second half of 2024. We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multi-year opportunity enabled by AI.”

Semiconductor Rally

Micron’s advance certainly helped give the semiconductor sector a boost on Thursday, with the VanEck Semiconductor ETF SMH, an exchange-traded fund that holds all three of the above-mentioned stocks, gaining 2.3%. The ETF is up 26.6% so far this year.

So, the question for potential AMD investors is, do they think AMD is a good enough stock to recapture its recent record highs? Here are the things to weigh up: has AMD got the product portfolio to compete with rivals such as Nvidia? Can AMD fulfill its earnings forecasts? Will investor faith in the technology rally hold out?

If so, investing in AMD now is worth a chunky 27% return on Thursday night’s closing price.

Now Read: Micron Stock Is Soaring Thursday: What’s Going On?

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