Advanced Micro Devices, Inc. (AMD) closed at $125.02, marking a 1.32% decline from the previous trading session. With a market cap of $202.88 billion, AMD has experienced a year-to-date return of 15.19%, underperforming the S&P 500’s 26.85% over the same period. The 1-year return for AMD stands at 10.15%, compared to the S&P 500’s 28.21%.
Valuation metrics reveal AMD’s trailing P/E ratio at 110.64 and a forward P/E of 25.13, reflecting high investor expectations. The company’s profitability includes a profit margin of 7.52%, supported by $24.3 billion in trailing twelve-month revenue and $2.22 billion in levered free cash flow.
Most memorably, the $3.5 billion cloud startup Vultr received a $333 million check from AMD and LuminArx Capital Management. With this funding, Vultr plans to increase its GPU service for AI models to show the increasing need for AI computing infrastructure.
For Vultr, AMD believes that it can use this firm as a market platform to advertise its GPUs such as the recently introduced MI325X and the planned MI250 chips to be released in 2025. Additionally, it lets AMD become Vultr’s designated supplier of AI hardware, which is a nice move against current industry front-runner Nvidia.
Vultr disclosed the plans for building a supercomputing cluster in the Chicago area with the incorporation of thousands of the AMD GPUs coinciding with AMD’s strategic ambitions of developing the presence in the AI and cloud computing sector. The current partnership will be instrumental in elevating AMD’s market profile as stated by Dave McCarthy, vice president, cloud and edge service at IDC.
AMD’s investment mirrors Nvidia’s recent market acquisitions including a $400m funding of CoreWeave and $2.3 billion debt financing that was supported by Nvidia GPUs. Vultr and other cloud service providers such as TensorWave are all potential partners and customers for AMD in the growing GPU and AI hardware market.
AMD also recently acquired ZT Systems, a designer of data-center equipment, for $5 billion, to strengthen its grip on AI and data center segments. These investments form part of AMD’s overlying corporate agenda of expanding market reach and entry into the emerging AI and cloud computing markets.
This outlook has remained bearish since the company’s price hit a high at $227 in March this year. Since then it has been ranging within a weekly bullish flag pattern, and at the time of this writing, it is at a key support of $125.
In turn, if this support level takes hold, we could be looking at a bounce and even a rebound for AMD. If a breakdown is witnessed, $125 could lead to further drops and with the next support level rather close to the $100 level. This support level confluences with the bullish flag support and a horizontal support area where buyers can establish longs if a buy confirmation is witnessed.
AMD’s recent moves reflect a balance of opportunities and challenges. The investment in Vultr places AMD as the market leader with its next-gen GPUs for AI infrastructure share. Despite this, its P/E ratio is high and its performance below that of the S&P 500 index raises question marks on growth sustainability.
The prospects of the company depend on its capabilities to defend technical support and gain from artificial intelligence programs. Earnings are expected between January 28 and February 3rd, 2025.
AMD investment in Vultr also supports the drive for artificial intelligence and cloud based solutions although the company competes with Nvidia on the GPU front. The stock has found some support at $125 and therefore the coming weeks will unveil if AMD will be able to pull out a recovery or not.
Consequently , from the investors’ perspective, there are Pros in the form of advancements in artificial intelligence, rationalized in its business proposition through proposing positive valuation and adjusted for Risk in terms of the competitive outlook into the relevant markets.