Should You Buy AMD Stock Shares for Investment?


Advanced Micro Devices, Inc. (Nasdaq: AMD) has grabbed the attention of investors across the market over the past year, with nearly 70% gains in 2021. The S&P 500 finished the year on gains of around 27%, meaning AMD more than doubled the returns of the most widely accepted benchmark for stock market performance in the United States. 

With such a dramatic rise in the price of the stock, many are considering diving in, but one question weighs heavy: did you already miss your opportunity to buy AMD shares?

Advanced Micro Devices has clearly been a prime growth stock through 2021, but what’s in store for 2022? Can the company maintain its stellar performance?

Should You Buy AMD Stock?

There’s no question that the action in AMD’s stock price was impressive in 2021. Considering the fact that 270 exchange-traded funds (ETFs) hold the stock, according to ETF.com, the major players on Wall Street have taken note. 


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But what makes the chipmaker stand above the rest? And why is Wall Street so in love with the ticker?

AMD Stock’s Historical Performance

AMD has only recently become a strong pick. For the first 30 or so years of its existence, the stock was overwhelmingly choppy. The company’s highly fragmented business model didn’t do the stock’s price any favors, either. With its hands in too many pots, the company simply couldn’t find strong footing with investors. 

However, in 2015, things started to change for the better. 

Dialing down its fragmented business to only two products, AMD became the leader in its niche, resulting in massive flows of revenue and profit. This led to a surge in the stock’s price. 

The stock was trading at $1.74 per share in September 2015. Had you purchased $10,000 worth back then, you’d be holding more than $795,000 worth of stock as of January 2022. 

Since 2015, there have been some ups and downs in the stock, but the ups have far outweighed the downs. In the past five years, investors have enjoyed more than 1,200% gains, beating out the S&P 500 by more than 10 times. 

A Decision Made Years Ago Pays Off

The first 30 or so years of AMD’s publicly traded stock was choppy because of the inconsistencies of its fragmented business. However, in 2015, the semiconductor company decided that it would focus on just two offerings: central processing units (CPUs) and graphics processing units (GPUs). 

Making this change gave the company the ability to focus all of its efforts on a couple of core products, and making them the best of the best on the market. AMD has done just that, which is why there’s been such tremendous growth in the company’s share price. 

Ultimately, dialing the focus down to these products and creating the best products in the industry has led to massive wins for the company in various sectors:

Gaming

AMD is the hands-down leader in the GPU space when it comes to gaming. The two most popular gaming consoles in the world — Microsoft’s (Nasdaq: MSFT) Xbox and Sony’s (NYSE: SONY) PlayStation — are both brought to life by AMD’s processing units. 

While Intel (Nasdaq: INTC) GPUs maintain the lead in home computer systems, AMD is clearly the leader in the gaming console industry, and it is picking up steam in personal computers as well. 

Data Centers

Data centers are the heartbeat of the Internet. Without these groups of servers and computers all around the world, there wouldn’t be an Internet, a cloud, artificial intelligence, or anything related to it. 

Data centers are another area in which AMD thrives. 

According to Omida, AMD’s EPYC processors are a big hit, leading the company to control around 16% of the server market. That means 16% of the websites you visit live on servers powered by AMD chips. That’s an impressive market share, especially when you consider that the market is expected to grow to be worth $92 billion in short order.  

The company is also getting interest from big brands to power the cloud. IBM recently announced that it would be using the company’s CPUs to handle the heavy workloads created through IBM Cloud operation. 

Electric Vehicles

AMD is also becoming a force to be reckoned with in the electric vehicle and driverless vehicle industry. The largest company in the industry, Tesla (Nasdaq: TSLA), currently uses AMD processors to power the brain in many of its models. Recently, the company announced it would be using AMD to power the Model Y, a vehicle it sells in China. 

Crypto Mania

The metaverse, cryptocurrencies, and the blockchain have been hot topics throughout 2021, and 2022 is expected to bring more of the same. The high-end processing units developed by AMD are helping to keep the industry alive. 

Late last year, Meta Platforms (Nasdaq: FB), the parent company of Facebook, said it would be using AMD processing units to power its metaverse activities. And Meta Platforms is likely just one of many companies that will build their advanced online features on the backs of high-end AMD chips. 

Significant Revenue Growth

Focusing on a couple of core products and making them the best in the business has created serious revenue growth for AMD. 

The year 2021 proved to be highly profitable. In the first three quarters of 2021, the company generated $11.6 billion in revenue, representing a 78% year-over-year increase over the same three quarters of 2020. Net income climbed more than 200% to $2.2 billion thanks to rising gross margins. 

This was even more impressive when you think about the more than quarter billion-dollar increase in taxes the company paid during this period. 


What Analysts Think About AMD Stock

Overall, analysts have pretty positive opinions of Advanced Micro Devices. Based on analyst ratings, AMD is one of the top tech stocks on the market today. There are currently 25 analysts covering the stock, 16 of whom rate it a Buy and nine of whom rate it a Hold. There are no sell ratings. 

In terms of price targets, on the high end, some analysts expect the stock to reach $180 per share over the next year, while the low price target sits at $115 per share. The average target clocks in at $143.71, representing a potential 4.62% upside. 


Things to Consider Before You Buy AMD Stock

Looking at everything above, AMD is an impressive stock to consider. However, there are expectations that growth will slow in 2022. Nonetheless, many expect the stock to at least keep up with overall markets, if not beat them. 

Before you make the decision as to whether you should buy, there are a few factors you’ll want to consider:

  • Valuation. The valuation of AMD stock is at the midway point when compared to peers. While Intel’s price-to-earnings ratio (P/E ratio) sits around 10, and NVIDIA’s (Nasdaq: NVDA) sits at well over 80, Advanced Micro Devices trades with a P/E ratio of around 40. It’s comfortably between the two, but definitely not the most undervalued play. 
  • Volatility. AMD stock is known for high levels of volatility. With increased volatility comes increased risk. Don’t invest in the stock if you’re a risk-averse investor. 
  • AMD Doesn’t Pay Dividends. Finally, the company has never paid a dividend and there’s no indication that dividends will be coming down the line. If you’re an income investor, this isn’t necessarily the stock for you. 

Final Word

Deciding whether you should buy AMD stock is something that only you can do. If you’re a tech investor with a stomach for volatility and willing to take the leap in hopes of yet another strong year, this one may be for you. 

There’s no discounting the fact that the company has built a strong business that ranks well within the top three in terms of CPUs and GPUs, and the fact that the company has seen impressive growth in revenue and profitability. However, there are also the matters of volatility and the fact that the company doesn’t pay dividends. 

Regardless of whether or not you decide to invest in AMD, it’s important that you do your own research and form your own opinion. Never take an analyst’s or expert’s word for it. 



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