advanced micro device (AMD -2.83%) Our inventory has been sold out over the past few weeks. Concerns about slumping computer sales and competition in the artificial intelligence (AI) accelerator market appear to have weighed on the stock price.
On the surface, I can see why AMD is struggling. The company's sales for the first nine months of 2024 were $18 billion, a 10% increase, far below the triple-digit sales growth of its major rivals. Nvidia. Additionally, AMD's gaming and embedded division revenue declined by 58% and 38%, respectively, in the first three quarters of 2024.
Nevertheless, long-term trends in the chip market should halt the decline and push the stock higher in the coming years. Here's why:
Advantages of AMD
Despite competitive concerns, investors shouldn't discount the AI accelerator business and its ability to fundamentally change AMD. Allied Market Research predicts a compound annual growth rate of 38% for the AI chip market through 2032, indicating that it is likely to experience significant growth over that eight-year period.
Due to lack of Nvidia accelerators, customers microsoft and meta platform also turned to AMD. As a result, data center revenue (including AI accelerators) grew 107% in the first nine months of 2023.
More importantly, the data center division has accounted for 48% of AMD's revenue so far this year. To date, Nvidia's data center division accounts for 87% of its revenue for the first nine months of fiscal 2025 (ending October 27). Over time, the data center division could become a larger part of AMD's revenue, eventually rivaling Nvidia's 87% share.
In fact, the percentage of revenue from the data center segment may even decline due to recovery in other segments. But whatever the revenue stream, improving growth likely means AMD stock will thrive over the next eight years.
Randi Zuckerberg is a former Facebook director of market development and spokesperson, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Will Healy holds a position at Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
