As we head into the first couple of weeks of the year, Advanced Micro Devices (NASDAQ:AMD) shares are looking like one of the more intriguing opportunities in the semiconductor space. From their all-time high in March of 2024, the tech giant’s stock has retreated a staggering 50%, including a 30% drop in the final quarter of last year alone.
This decline has brought shares back to levels not seen since 2021, a disappointing reality for existing investors but a potential goldmine for those of us on the sidelines. With a market cap hovering around $200 billion, AMD, headquartered in Santa Clara, remains a major player in designing high-performance computing products and data center technologies.
For investors with an appetite for outsized risk and outsized rewards, the setup here could be too good to pass up. Shares are near multi-year lows, the broader market is trading just below all-time highs, and the Federal Reserve’s mood for cutting rates is creating a risk-on environment. There are several reasons investors should be getting excited about AMD’s potential in 2025, so let’s jump in and take a look.
Consistent Profitability Keeps AMD on Solid Ground
To start with, let’s take a look at AMD’s recent performance. Record revenue numbers, including a 17% year-over-year jump, suggest AMD’s business model is ticking over nicely, notwithstanding some hit-and-miss earnings numbers last year.
Investors should look for the stock to continue gaining traction in its data center segment, where revenue more than doubled in the last report. This growth is particularly promising, given the increasing demand for AI-driven technologies and high-performance computing solutions.
Despite some beats and misses on headline figures over the past year, AMD has remained consistently profitable. The next earnings report, due in February, will be critical for signaling whether the company’s growth trajectory is back on track.
Analysts Remain Bullish on AMD
There’s also the fact that several analysts remain exceedingly bullish on AMD’s prospects despite the stock’s underperformance.
In a note to clients last month, the team over at Mizuho reiterated their Outperform rating, citing the company’s resilience and its strong position in the semiconductor market. They set a price target of $180, which points to a targeted upside of some 40% from where the stock closed last night.
Similarly, HSBC doubled down on its Buy rating just this week, emphasizing AMD’s potential to rebound sharply. These bullish stances have come as AMD’s stock hovers near long-term support lines, making this an interesting time for investors to consider getting involved.
The Impact of 2024’s Challenges on AMD’s Valuation
That said, it’s not all sunshine and rainbows for AMD. Some analysts remain cautious, highlighting risks that investors should consider. Morgan Stanley, for example, recently reiterated its equal weight rating, while Bank of America downgraded its stock from Buy to Neutral last month. Even among bullish analysts, there has been a trend of reducing price targets in light of last year’s performance.
So, what does that say about where the stock is trading today? While there’s clear variance among the analyst community, the stock’s beaten-down valuation makes us think the risk/reward profile is tilting in favor of buyers.
Why AMD’s Support Levels Create a Strategic Entry Point
The technical setup also supports the bull’s case, suggesting that now could be the time to be brave with AMD. The stock’s relative strength index (RSI) is sitting at 47, indicating that it’s on the oversold side of the range with a ton of room for the stock to run to the upside.
If the company can deliver a strong earnings report next month that ideally smashes analyst expectations across the board, we could be looking at the mother of all comeback rallies. With the stock trading along a solid line of support right now, this could be the perfect time to start building a position for such an eventuality.