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Why AMD Stock Is a Must-Own AI Chip Play

Earlier this year, Advanced Micro Devices (NASDAQ:AMD), commonly known as just AMD, was a darling of the financial markets. Yet, lately people have ignored AMD because they’re obsessed with Nvidia (NASDAQ:NVDA). It’s fine to pay attention to Nvidia, but don’t dismiss the upside potential of AMD stock.

Always an innovator, AMD continues to introduce powerful tech hardware into the market. For example, AMD recently showcased its ultra-powerful EPYC central processing units (CPUs) and Pensando data processing units (DPUs).

However, short-term stock traders didn’t seem very impressed with these product offerings. Many of them have been too occupied with Nvidia to think about AMD. That’s a mistake, though, as AMD can benefit from the AI trend just like Nvidia can.

AMD’s AI-Focused Acquisition

Do you need evidence that AMD is proactively riding the AI-tech wave in 2023? Look no further, then, as AMD just announced a game-changing acquisition that the financial press isn’t spending enough time talking about.

According to AMD’s official blog, the chipmaker is deepening its AI inference software capabilities though AMD’s acquisition of French company Mipsology.

The buyout is now finalized, so AMD can access Mipsology’s AI inference and optimization tools. Plus, AMD will avail itself of Mipsology’s skilled software team, which reportedly “will join the AMD AI Group.”

The point is, AMD is clearly very serious about pursuing advancements in the AI-technology field. The Mipsology acquisition will, as the blog post asserts, enable AMD and its customers to “tap into the vast potential of pervasive AI.”

AMD Stock Tumbles Nearly 7%, But Don’t Worry

Aug. 24 was a rough day for AMD’s shareholders. Nvidia had just released its excellent second-quarter 2023 financial results. As it turned out, Nvidia easily beat the analysts’ consensus earnings per share (EPS) prediction of $2.08 by delivering earnings of $2.70 per share.

AMD had already released its Q2 results, and the company marginally beat Wall Street’s quarterly EPS forecast. The actual earnings result was 58 cents per share, versus the expected 57 cents per share.

Since Nvidia’s EPS beat was much more eye-catching, AMD looked lackluster in comparison. Consequently, AMD stock fell nearly 7% on Aug. 24, landing at $101.80.

Mizuho analyst Jordan Klein suggested that “no one” besides Nvidia sounds good in the semiconductor market. I don’t see it that way, though, and I feel that the AMD share-price selloff was irrational.

I tend to concur with the viewpoint of Global X research analyst Tejas Dessai. As Dessai explained, there are “hundreds of billions of dollars worth of computational infrastructural inside data centers that are up for replacement in the new computing paradigm.”

In other words, the AI-hardware market is vast, and there’s room for more players than just Nvidia. Moreover, if Nvidia brings attention and publicity to the AI-chip industry in general, AMD could benefit from this.

AMD Stock: $150 Is Still in Play

The AI-hardware market doesn’t have to be a zero-sum game. There’s room for both Nvidia and AMD to capitalize on the AI trend, so don’t hastily dismiss AMD and miss a prime investment opportunity.

I’ve set a $150 price target for AMD stock, and I’m not about to give up on that prediction. The market’s obsession with Nvidia doesn’t exclude AMD from the AI-hardware industry’s growth. So, hold your AMD shares and continue to ride the AI wave for the rest of 2023 at least.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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