AMD Stock Buy Alert: Capitalize on the AI ​​Boom with Advanced Micro Devices

Advanced Micro Devices (NASDAQ:AMD) represents a best-in-class microchip and semiconductor company and one of the best ways to capitalize on the current artificial intelligence boom. AMD shares are up 53% in the last 12 months and are up 526% in five years.

Except archrival Nvidia (NASDAQ:NVDA), AMD is one of the best-traded companies in the chip market that investors can own. Since March 8, AMD stock has fallen 27%. Treating pullbacks as a buying opportunity makes sense for investors.

AI chip sales are growing

The main reason AMD’s shares are falling is that the company’s financial results, while better than expected, fell short of Wall Street estimates.

For the first quarter of this year, AMD reported EPS of 62 cents, just slightly above the 61 cents expected on Wall Street. Revenue was $5.47 billion, also slightly off estimates of $5.46 billion. Sales increased by 2% compared to the previous year.

While the financial results weren’t eye-popping, they did include some important numbers that point to a significant growth engine that’s gaining momentum at the company.

Most notably, the company forecast AI microchip sales of $4 billion this year. That’s double the company’s $2 billion estimate last fall and the second time in six months AMD has revised its AI chip sales forecasts. This proves the growing demand.

Additionally, AMD management said that revenue for its Data Center unit increased 80% year-over-year to $2.3 billion, driven by strong sales of its latest MI300 series AI chips.

The company said it has sold more than $1 billion worth of new AI chips since their launch last December.

AMD’s overall first-quarter results would have been better had it not been for a 48% decline in sales in its legacy video game chip segment, which posted revenue of $922 million in the quarter.

Partnerships and market share

Another key to AMD’s success and future growth potential is that the company forms strategic partnerships with other companies.

Lately, Microsoft (NASDAQ:MSFT) announced plans to offer its cloud customers AI chips from AMD instead of Nvidia chips.

In the future, Microsoft will sell AMD’s mainstream MI300X AI chips through its Azure cloud computing portal.

A partnership with Microsoft is seen as a viable solution as Nvidia H100 GPUs that support AI applications are becoming increasingly difficult to obtain due to sky-high demand around the world.

Partnerships like the one with Microsoft allow AMD to gain market share in AI chips and take over from Nvidia. While AMD still has a ways to go to significantly take over Nvidia’s 75% share of the AI ​​chip market, it is managing to take share from rivals Intel (NASDAQ:INT).

AMD’s data center AI chip sales increased 62.5% from 2021 to 2023, while Intel’s data center AI chip sales dropped 30% over the same period.

The MI300X series of AI chips is expected to help further expand AMD’s market share as they offer faster processing speeds and more memory than the company’s previous products.

Buy AMD stock

Advanced Micro Devices has been a great investment over the years. The company’s stock has increased 3,900% over the past decade.

Now the company has a huge catalyst ahead of it in the form of its latest AI microchips, which are already selling well and are expected to reach $4 billion in sales this year.

Strategic partnerships with companies such as Microsoft and growing market share in AI chips ensure AMD’s continued success. Therefore, AMD stock is a buy.

At the time of publication, Joel Baglole held long positions at NVDA and MSFT. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s Editorial Guidelines.