What is the Next Move for Underperforming AMD Stock, Fresh off 52 Wk Lows?

AMD's stock (NASDAQ:AMD) has significantly underperformed both it's peers, and the broader market in 2024. After setting out as a pivotal player in the semiconductor, and GPU space, AMD has fallen behind when it comes to artificial intelligence.

Where Nvidia has led the way on GPU's, with it's own stock (NVDA) gaining 179% on a year-to-date basis, and Broadcom has carved it's own niche, seeing it's stock (AVGO) also deliver a double YTD (+103.42%), AMD holders have been left nursing losses of 13.98% over the same time-frame.

The proximity to 52 week lows is clear, with AMD setting the mark as the last trading week came to a close at $117.90. Wolfe research pointed to a potential $3 billion underperformance coming in FY 2025 against expectations, with “only” $7 billion of AI revenue against what is perceived to be a buy-side expectation of $10 billion.

Whilst longer term holders can point to market outperformance in years gone by, the delta to the S&P 500's 25% gain through 2024 begs the question as to whether there will be a return to gains in 2025, and what the next steps are for AMD to get back on track.

One move that could signify a shift, is the fact recent lead position that AMD has taken by co-leading a substantial $3.5 billion growth financing round for Vultr. This investment aims to expand Vultr's capabilities in artificial intelligence and cloud infrastructure, highlighting AMD's proactive stance in advancing AI technologies and cloud computing solutions.

In this funding round, Vultr successfully raised $333 million dedicated to bolstering its AI capabilities. The focus is on utilising AMD Instinct accelerators, which are expected to enhance Vultr's scalable cloud solutions, making it more competitive in the expanding AI industry. The significant investment signifies a robust collaboration between AMD and Vultr, emphasising the growing importance of AI integration in advancing cloud technologies.

A key point highlighted in this initiative is the transition of AI innovation from a strong emphasis on hardware to more nuanced algorithmic advancements. Moreover, AMD is also exploring partnerships to enhance AI computing capabilities, as seen with its collaboration with LuminArx Capital Management. Such collaborations underscore AMD's commitment to providing comprehensive solutions for enterprises seeking to leverage AI technologies effectively.

Analysts have revised down lofty AMD stock price targets in recent weeks, with Morgan Stanley the latest to drop their $169 target to $158. Truist, Mizuho, and BofA are other names to have cut their price targets to $145, $180, and $155 respectively. With the current price action on the stock taking place below around $120, there remains potential upside in the eyes of analysts, with execution through these next phases likely to be key.