AMD stock just fell. Is 2024 the time to invest?

Actions in Advanced microsystems (NASDAQ:AMD) have fallen by 11% over the past three months.

The company has been a major beneficiary of the recent artificial intelligence (AI) boom, with its stock up 147% since the start of 2023. AMD has enjoyed strong growth in likeability as its rival, Nvidia (NASDAQ:NVDA)has dominated the AI ​​chip market. With AMD being one of the leading chipmakers with the second-largest market share of graphics processing units (GPUs), Wall Street was hoping to follow in Nvidia’s footsteps.

However, the lackluster earnings release and Nvidia’s exceptional growth suggest that AMD could face challenges in the years ahead. The question then becomes whether it’s worth investing in AMD for the long term now that the company is down or whether it’s worth looking at another way to gain exposure to the same markets.

AMD stock just fell, so is 2024 the time to invest? Let’s evaluate.

AMD’s latest earnings release did little to excite investors

AMD reported its first quarter 2024 results on April 30. Revenue rose 2% year over year to $5 billion, beating analysts’ expectations by $20 million. The company posted strong gains in its data center and customer segments, with revenue up 80% and 85% year-over-year. However, it was hit hard by declines of more than 40% in its gaming and integrated products divisions.

Overall, the company’s quarter went very well. It beat revenue and earnings per share forecasts. However, AMD’s performance was overshadowed by Nvidia’s revenue increase of 262% year-over-year during the same quarter. And AMD isn’t just struggling to keep up in AI. While the company’s game sales fell, Nvidia’s gaming segment saw gains of 18% during the same period.

Constant differences in the companies’ growth have led AMD to free movement of capital has fallen 52% since 2021, while Nvidia’s has skyrocketed 490%. The chart above illustrates Nvidia’s massive lead over AMD by this metric, suggesting that Nvidia is better equipped financially to continue growing its chip business and maintain its market dominance.

AMD remains a leading chipmaker, with positions across technology, from PC gaming to consoles, data centers, consumer products like laptops, and more. However, the looming threat from Nvidia means AMD will need to differentiate itself in the industry and give customers a reason to choose its products.

Being competitive in AI will likely be an uphill battle

Nvidia has cornered the AI ​​GPU market, capturing an estimated 70 to 95 percent share of the industry. The sector is growing rapidly, suggesting that the company should have room to maintain its lead and welcome new entrants like AMD. However, past trends in the chip market indicate that AMD will have a mountain to climb if it ever aims to dethrone its larger rival.

The story continues

Nvidia has had a majority share of the discrete GPU market for at least a decade, with its share increasing from 65% to 88%. Meanwhile, since 2014, AMD’s market position has fallen from 35% to 12% in the first quarter of 2024.

AMD also had problems…