AMD Stock is Melting Down Again—Time to Buy?

Advanced Micro Devices (NASDAQ:AMD | AMD Price Prediction) is the latest large-cap tech company to plunge after the release of some strong quarterly earnings results. Indeed, it feels like impressing on earnings is a painfully difficult task this time of year. Perhaps that’s how high the bar has been raised after an impressive past year of gains for a wide range of tech names.

Either way, the market, as a whole, seems to be in quite a bad mood right now, as new AI innovations, like those served up by Anthropic, inspire fear in the hearts of software investors.

A decent fourth quarter, but it’s a really tough crowd this earnings season

Even if broad markets look to enter some sort of correction, I think Advanced Micro Devices shares are worth watching on the way lower. The AI boom is very much in play, but valuations do seem stretched across the board. And as every tech-related stock looks to move lower in what’s shaping up to be a nasty week, there are bound to be unfairly punished stocks for dip-buyers to consider scooping up.

In any case, it’s not taking investors too long to find any tiny imperfections to justify hitting the sell button this earnings season. When it came to Advanced Micro Devices, the fourth quarter was a typical beat, with revenue and earnings comfortably beating expectations and the outlook looking up.

So, why did shares collapse more than 8% in the after-hours session? The outlook for the first quarter, though decent, didn’t quite have the upside surprise that some were hoping for. Of course, it takes a really big shocker of a surprise from the AI plays to move the needle into earnings these days. With China sales poised to come in lower for the first quarter due to export controls, there seems to be enough “hair” on the quarter to warrant getting out.

It’s tough to go up against Nvidia as Vera Rubin approaches

I find there was nothing fundamentally wrong with Advanced Micro Devices after the latest number. Of course, it’s hard to shock and awe when you’re constantly being compared with the likes of Nvidia (NASDAQ:NVDA). Indeed, nobody likes to be compared to their first cousin once removed. In any case, I think investors should look beyond the good quarter to a number of timely catalysts that might just deliver the surprise some upbeat investors are looking for.

Notably, the Helios rack-scale system and MI450 chips could give shares of Advanced Micro Devices a bit of a boost as investors gear up for the second half. Of course, Helios and the latest GPU are going to put the firm on a collision course with Nvidia, as it looks to enter the age of Vera Rubin. It’s hard to compete directly against Nvidia, but I do think Advanced Micro Devices could be a great relative value play, especially since it’s easy to count Helios out of the game early on.

With AI agents picking up momentum, I think there’s a scenario that could allow Advanced Micro Devices to walk away as a massive winner, even as Nvidia looks to sprint ahead. Add rumors swirling around AMD GPUs being in the next-generation Xbox (it might release next year), and it feels like Lisa Su’s AI chip titan is worthy of buying into weakness. Though the good earnings weren’t good enough, I do think that the market’s souring on growth and tech may be enough reason to play it cautiously with the chip plays. 

In short, Advanced Micro Devices’ stock had too much strength priced in. As new hardware hits the market, though, I don’t think the name will stay down for very long, especially now that the expectations have been recalibrated to the downside.