Do yourself a favor and buy the dip on Advanced Micro Devices ($AMD). This company presents tremendous growth opportunities and is undervalued at **$125**.
**Position -**
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**Q3 2024 Highlights**
* Revenue of $6.8 billion. 18% increase YoY.
* Gross profit of $3.4 billion. 24% increase YoY.
* Operating income of $724 million. 223% increase YoY.
**Q3 2024 By Segment**
Data Center -
Net revenue of $3.5 billion. 122% increase YoY.
Operating income of $1.04 billion. 240% increase YoY.
Client -
Net revenue of $1.88 billion. 29% increase YoY.
Operating income of $276 million. 97% increase YoY.
Gaming -
Net revenue of $462 million. 69% decrease YoY.
Operating income of $12 million. 94% decrease YoY.
Embedded -
Net revenue of $927 million. 25% decrease YoY.
Operating income of $372 million. 39% decrease YoY.
**Data Center Growth** \- This is AMD’s fastest growing segment and accounts for roughly 50% of all revenue. This number is going to continue its rapid rise due to key acquisitions and product innovation. Lisa Su estimates the market for data center AI accelerators to grow at a CAGR of 60% until the year 2028. That would value the market at $500 billion for things like CPUs, GPU’s, FPGA’s, and ASIC’s. Obviously, Nvidia currently dominates the market. Despite this, there is room for multiple players and AMD has shown their ability to capture market share. In 2022, they surpassed Intel in both market value and annual revenue, positioning themselves as the clear number two player in the market. I've said it before with companies like Palantir, data is the future and every company needs it. Well in order for a company to have data, you need chips. Everything needs chips. We are still in a small and juvenile market that has massive amounts of room to grow.
**Acquisition of ZT Systems** \- Announced in August 2024, AMD will acquire ZT Systems for $4.9 billion. The deal is expected to be finalized in the first half of 2025. ZT specializes in designing and deploying data center AI computing and storage solutions. This shows the focus and commitment AMD has to their fastest growing segment.
**Strong Belief in Lisa Su -** Lisa Su is an amazing CEO with a strong desire for excellency. After becoming CEO in 2014, she has completely turned around the company and continues to improve it. Here is a great video to watch of her - [https://youtu.be/8Ve5SAFPYZ8](https://youtu.be/8Ve5SAFPYZ8)
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**Conclusion** \- AMD is gaining significant amounts of market share for data centers, a trend that will continue as the market grows. Despite declines in the gaming and embedded segments, the company overall continues to grow revenues. The decline in gaming looks alarming but it makes sense. New gen consoles came out 4 years ago which AMD supplies chips for. Regardless, what I’m focused on here is the data center growth. AMD is innovative and managed extremely well which can be seen by continuously improving operating margins and FCF. This company will continue to become a monster. At a current price of **$125,** I expect this to easily get back to **$200+** in 2025 giving a solid 60% upside.