The stock market started interesting this year. During the first few weeks of 2025, technological shares in particular showed similar levels of Momentum that was seen for a large part of the past two years – largely thanks to continuous support of the story of artificial intelligence (AI).
However, the euphoria came to a halt at the end of January after a Chinese start-up called Deepseek had released an AI model that was related to OpenAi’s Chatgpt.
What surprises investors is that Deepseek claims to have built his AI for much less than what OpenAi, Anthropic, Perplexity and other AI-start-ups in the US publish. It is not surprising that technological stocks have fallen quickly in recent weeks. In particular, chip stocks are really startled.
Since the news of Deepseek started to pick up at the end of January, shares of Advanced micro devices (Nasdaq: AMD) have fallen by around 10%. Below I will analyze and explore some interesting trends in the appreciation of AMD if this is a good time to buy shares from the chiplider.
A valuation statistics that I find useful is the Forward price-gain Multiple (p/e). This ratio takes into account what Wall Street analysts predict for the future income of a company, which can help to take a look at how industry experts view the growth prospects of a company towards his colleagues.
In the table below I have summarized the forward p/e and market capitalization of AMD from the quarter for the past year.
|
Category |
9/30/2023 |
31/12/2023 |
31-3/2024 |
30-6-2024 |
9/30/2024 |
Current |
|---|---|---|---|---|---|---|
|
Forward p/e |
24.6 |
39.4 |
53.8 |
47.4 |
30.1 |
25.6 |
|
Market capitalization |
$ 166 billion |
$ 238 billion |
$ 292 billion |
$ 262 billion |
$ 265 billion |
$ 194 billion |
Data source: Yahoo! Finance
AMD’s forward p/e of 25.6 is essentially equal to levels that are seen in September 2023. The most important difference that I see is that the market capitalization of the company has grown by around $ 30 billion during this 15 -month period.
The slide below breaks down the income and business income of AMD for 2024. In my eyes, the most important details on this slide is the data center operation of the company, because this segment competes with the most with Nvidia.
Last year AMD’s data center activities grew by 94% to $ 12.6 billion. What is even more important, the company generates considerable operational leverage in this company, as seen in the growing profit margins. Unfortunately, the slow growth of AMD’s gaming and embedded units drags the general turnover and profit levels of the company – and that is what I think that investors persist.