AMD: Why I Doubled My Position After DeepSeek Sell-Off

Seeking Alpha01-31

SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the ...

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CaseyLKC
01-31
CaseyLKC
Okay
sentosa
01-31
sentosa
Buy now accumulate

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AMD, just like Nvidia (NVDA), slumped on Monday on the DeepSeek news which triggered panicked headlines and deep concerns in some parts of the stock market about AI spending and GPU sales. However, I believe not much is going to change for AMD or Nvidia, and both companies are going to continue to see surging demand for their AI products. While I still like Nvidia a lot due to its moat in the AI GPU market, AMD has seen highly encouraging momentum in the Data Center segment and shares are now trading at a near-50% discount to the 1-year average P/E ratio, indicating that sentiment has swung too much to the bearish side... which may reveal a contrarian investment setup!Data by YChartsPrevious ratingI previously called attention to AMD’s already low valuation in my work -- The Valuation Makes No Sense -- which was published last month and well before the recent DeepSeek disaster that shook up AI stocks. While DeepSeek made a splash, I believe AMD and Nvidia are going to see increasing demand for their GPUs and AI accelerators going forward, and the DeepSeek appearance is not going to change this. AMD also held up much better than Nvidia during the latest sell-off, indicating that investors may be too bearish on the chipmaker.Why I doubled down on AMD and increased my position by 2x after the DeepSeek newsI doubled my position in AMD this week, mainly because the market currently does not seem to be very forward-looking and rational when it comes to AI stocks. DeepSeek made global headlines this week for the efficiency of its AI model, which caused valuations for AI companies like Nvidia or AMD to tumble. Additionally, AMD attracted another down-grade this week which weighed on the company's valuation. However, AMD didn't drop as much as Nvidia on Monday, indicating that we may see a bottom for AMD's shares very soon.AMD is now so attractively priced, in my opinion, that the valuation incorporates an excess safety margin. This is mainly due to the fact that AMD has really started to excel in the Data Center business in the last two quarters, and I don't believe AMD gets enough credit for this achievement. To remind investors, AMD generated 25% Q/Q Data Center revenue growth in the quarter ending September 2024 compared to a 17% Q/Q growth rate for Nvidia.The difference in Data Center growth between AMD and Nvidia was 8 PP in the last quarter and 5 PP in the quarter before that (in favor of AMD). As recently as the first-quarter of AMD’s FY 2024, Nvidia had a more than 20 PP Q/Q growth advantage over AMD. In other words, AMD has fundamentally caught up to Nvidia in Data Center growth, although the consolidated top line does not yet show the massive progress that AMD has made.Nvidia also has a distinct advantage over AMD in terms of operating cash flow and net income growth, but given AMD's Instinct ramp in FY 2025, the chipmaker has considerably more potential for growth in the Data Center segment than Nvidia, in my opinion.Data by YChartsThe reason is that AMD has made aggressive investments into its AI accelerator pipeline, which has started to pay off in 2024... and the current year could show many more positive surprises. Nvidia has still a considerable advantage in terms of the pure size of its gross profits and its gross margins, but AMD is starting to catch up and the company's earnings report for the fourth-quarter, expected on February 4, 2025, is likely going to be a very strong one, in terms of both Data Center top line and earnings growth. In the most recent quarter, September, AMD generated a gross margin of 50% which was about one-third lower than Nvidia's margins. With the launch of higher-price AI accelerators in the Instinct series, however, AMD has a strong catalyst for sequential gross profit (margin) growth when it reports earnings next week.Data by YChartsFor the fourth-quarter, AMD is expected to report $1.09 per-share in earnings, which would calculate to a 41% year-over-year growth rate. Earnings momentum is still very much positive, but earnings estimates have started to fall lately, as more analysts expect gains from AMD's Instinct ramp to fall into FY 2025. I believe, however, as Instinct chip deliveries ramped up in Q4'24, that AMD has an excellent chance to beat low EPS estimates and could see a strong reaction when it reports earnings on February 4, 2025.Seeking AlphaAMD statement on DeepSeek and product pipelineAMD issued a statement after DeepSeek's splash this week, saying that DeepSeek R1 can be run on AMD Ryzen AI CPUs and Radeon GPUs. DeepSeek shows that AI models are getting more efficient and, likely, cheaper, which means that demand for AI accelerators and GPUs is only going to grow. Nvidia also issued a statement in which it indicated that the appearance of DeepSeek is an opportunity for growth in the GPU market, rather than a threat.AMD is obviously set to benefit from these strengthening trends with its new AMD Instinct MI325X and MI350X accelerators, which AMD is going to ramp in FY 2025. The chipmaker has also previously stated that it will move towards a faster product-release cycle in order to bring technological progress to consumers and enterprise customers at a faster pace. The MI350X is set to launch in the second half of FY 2025 and the next-gen MI400X AI accelerator will likely be available in FY 2026. With an increasing filled product pipeline and surging demand for AI accelerators/GPUs, AMD is set to see strong growth in FY 2025 and investors should consider buying the drop, in my opinion.AMD’s valuation implies a near-50% discount to 1-year average P/EBoth Nvidia’s and AMD's valuation corrected to the downside this week, but AMD is in more of a downtrend than Nvidia, despite the ramp in the Data Center business. AMD is currently priced at a forward price-to-earnings ratio of 16.6X (forward meaning FY 2026 earnings). After Nvidia’s share price slumped 17% on Monday and recovered 9% again on Tuesday in a strong recovery rally, the semiconductor company is valued at a forward earnings multiplier of 29.0X.AMD traded at an average 1-year P/E ratio of 30.8X which means the current valuation is about 46% below the valuation average of the last year... indicating that a major, unjustified change in investor sentiment has taken hold that is not defensible, in my opinion, based off of the strength of AMD's fundamentals.While investors may have been overly bullish on AMD at the beginning of the firm's Instinct ramp in the first half of FY 2024, I believe the pendulum has swung too far to the other side, creating a kind of contrarian investment setup. In my last work on AMD, I calculated a fair value of AMD of at least $216 per-share, which I still believe is a realistic long-term value for the chipmaker. If AMD were to revalue to its 1-year average P/E ratio, shares could be valued at $212 per-share, which is very close to my longer-term valuation target for the chipmaker.While AMD may be out of favor for now due to a range of reasons -- stock down-grades, uncertain impact of DeepSeek and other models, such as Alibaba's Qwen 2.5-VL, and an underappreciated Data Center ramp -- I believe the long-term outlook for AMD (and Nvidia) is one that will be defined by gradually increasing demand for higher GPU/AI accelerator shipments. This is set to benefit AMD as well as Nvidia and with AMD also set to report earnings next week, the chipmaker could have a revaluation catalyst as well.Data by YChartsRisks with AMDThe biggest risk for AMD is a potential shrinking of the growth advantage over Nvidia that the company has achieved, especially in the last two quarters, in the Data Center segment. AMD is still going to benefit from growing chip sales and the appearance of DeepSeek, in my opinion, is not fundamentally changing the outlook for AMD's AI accelerator shipments... which I continue to expect to ramp up drastically in FY 2025. What would change my mind about AMD is if the company were to see moderating growth in Data Centers and its gross margins declined in FY 2025.Final thoughtsDeepSeek is a new AI model that made a major splash this week. However, the appearance of this model indicates to me that demand for AI accelerators is going to increase, not decrease going forward. Lower compute intensity will further innovation in the market for GPUs and AI accelerators, which should also help AMD ramp up shipments in FY 2025, especially with new models slated to get released.Companies, especially in the U.S., will continue to need U.S.-manufactured AI GPU’s and accelerators in order to run the latest AI models and applications. In my opinion, DeepSeek as well as other AI models like Alibaba's Qwen 2.5-VL will only accelerate the transition to more powerful AI models long term, which means demand for chips will also grow. In terms of valuation, I believe the pendulum has too far swung to the bearish side and AMD may now be in a textbook contrarian investment setup.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":398533232677008,"gmtCreate":1738323193261,"gmtModify":1738323196943,"author":{"id":"4091363089250230","authorId":"4091363089250230","name":"CaseyLKC","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"4091363089250230","authorIdStr":"4091363089250230"},"htmlText":"Okay","listText":"Okay","text":"Okay","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/398533232677008","repostId":1135018317,"repostType":2,"repost":{"id":"1135018317","kind":"news","pubTimestamp":1738321988,"share":"https://ttm.financial/m/news/1135018317?lang=&edition=fundamental","pubTime":"2025-01-31 19:13","market":"us","language":"en","title":"AMD: Why I Doubled My Position After DeepSeek Sell-Off","url":"https://stock-news.laohu8.com/highlight/detail?id=1135018317","media":"Seeking Alpha","summary":"SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the m","content":"<html><head></head><body><h2 id=\"id_2301459152\">Summary</h2><ul style=\"\"><li><p>AMD shares fell to a 1-year low this week due to DeepSeek&#39;s AI chat assistant news, but I believe demand for AMD&#39;s AI products will remain strong in 2025.</p></li><li><p>I doubled my AMD position because the market is irrational and AMD is gaining ground in the AI accelerator market with surging Data Center revenues.</p></li><li><p>AMD&#39;s aggressive AI investments are paying off, showing significant Data Center revenue growth, and the stock is trading at a near-50% discount to its historical P/E ratio.</p></li><li><p>Despite DeepSeek&#39;s market impact, I remain confident in AMD&#39;s AI accelerators&#39; demand, making AMD shares attractively priced amid recent downgrades.</p></li></ul><p>Shares of <a href=\"https://laohu8.com/S/AMD\">AMD</a> tumbled to a fresh 1-year low on Tuesday after an AI start-up company named DeepSeek made global news for its latest AI chat assistant. AMD, just like Nvidia (NVDA), slumped on Monday on the DeepSeek news which triggered panicked headlines and deep concerns in some parts of the stock market about AI spending and GPU sales. However, I believe not much is going to change for AMD or Nvidia, and both companies are going to continue to see surging demand for their AI products. While I still like Nvidia a lot due to its moat in the AI GPU market, AMD has seen highly encouraging momentum in the Data Center segment and shares are now trading at a near-50% discount to the 1-year average P/E ratio, indicating that sentiment has swung too much to the bearish side... which may reveal a contrarian investment setup!</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b92568f58f6bae4fc57adf24dba5bf48\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"439\"/><span>Data by YCharts</span></p><h2 id=\"id_1073761465\">Previous rating</h2><p>I previously called attention to AMD’s already low valuation in my work -- The Valuation Makes No Sense -- which was published last month and well before the recent DeepSeek disaster that shook up AI stocks. While DeepSeek made a splash, I believe AMD and Nvidia are going to see increasing demand for their GPUs and AI accelerators going forward, and the DeepSeek appearance is not going to change this. AMD also held up much better than Nvidia during the latest sell-off, indicating that investors may be too bearish on the chipmaker.</p><h2 id=\"id_692351424\">Why I doubled down on AMD and increased my position by 2x after the DeepSeek news</h2><p>I doubled my position in AMD this week, mainly because the market currently does not seem to be very forward-looking and rational when it comes to AI stocks. DeepSeek made global headlines this week for the efficiency of its AI model, which caused valuations for AI companies like Nvidia or AMD to tumble. Additionally, AMD attracted another down-grade this week which weighed on the company&#39;s valuation. However, AMD didn&#39;t drop as much as Nvidia on Monday, indicating that we may see a bottom for AMD&#39;s shares very soon.</p><p>AMD is now so attractively priced, in my opinion, that the valuation incorporates an excess safety margin. This is mainly due to the fact that AMD has really started to excel in the Data Center business in the last two quarters, and I don&#39;t believe AMD gets enough credit for this achievement. To remind investors, AMD generated 25% Q/Q Data Center revenue growth in the quarter ending September 2024 compared to a 17% Q/Q growth rate for Nvidia.</p><p>The difference in Data Center growth between AMD and Nvidia was 8 PP in the last quarter and 5 PP in the quarter before that (in favor of AMD). As recently as the first-quarter of AMD’s FY 2024, Nvidia had a more than 20 PP Q/Q growth advantage over AMD. In other words, AMD has fundamentally caught up to Nvidia in Data Center growth, although the consolidated top line does not yet show the massive progress that AMD has made.</p><p>Nvidia also has a distinct advantage over AMD in terms of operating cash flow and net income growth, but given AMD&#39;s Instinct ramp in FY 2025, the chipmaker has considerably more potential for growth in the Data Center segment than Nvidia, in my opinion.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/599db606c3caf04f8ef930350684fae5\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><p>The reason is that AMD has made aggressive investments into its AI accelerator pipeline, which has started to pay off in 2024... and the current year could show many more positive surprises. Nvidia has still a considerable advantage in terms of the pure size of its gross profits and its gross margins, but AMD is starting to catch up and the company&#39;s earnings report for the fourth-quarter, expected on February 4, 2025, is likely going to be a very strong one, in terms of both Data Center top line and earnings growth. In the most recent quarter, September, AMD generated a gross margin of 50% which was about one-third lower than Nvidia&#39;s margins. With the launch of higher-price AI accelerators in the Instinct series, however, AMD has a strong catalyst for sequential gross profit (margin) growth when it reports earnings next week.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ca4584911e4e2d2ad17038339713c28c\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><p>For the fourth-quarter, AMD is expected to report $1.09 per-share in earnings, which would calculate to a 41% year-over-year growth rate. Earnings momentum is still very much positive, but earnings estimates have started to fall lately, as more analysts expect gains from AMD&#39;s Instinct ramp to fall into FY 2025. I believe, however, as Instinct chip deliveries ramped up in Q4&#39;24, that AMD has an excellent chance to beat low EPS estimates and could see a strong reaction when it reports earnings on February 4, 2025.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2db76ac8e7a0f1000d262fb0023cdeb1\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"229\"/><span>Seeking Alpha</span></p><h2 id=\"id_1031374504\">AMD statement on DeepSeek and product pipeline</h2><p>AMD issued a statement after DeepSeek&#39;s splash this week, saying that DeepSeek R1 can be run on AMD Ryzen AI CPUs and Radeon GPUs. DeepSeek shows that AI models are getting more efficient and, likely, cheaper, which means that demand for AI accelerators and GPUs is only going to grow. Nvidia also issued a statement in which it indicated that the appearance of DeepSeek is an opportunity for growth in the GPU market, rather than a threat.</p><p>AMD is obviously set to benefit from these strengthening trends with its new AMD Instinct MI325X and MI350X accelerators, which AMD is going to ramp in FY 2025. The chipmaker has also previously stated that it will move towards a faster product-release cycle in order to bring technological progress to consumers and enterprise customers at a faster pace. The MI350X is set to launch in the second half of FY 2025 and the next-gen MI400X AI accelerator will likely be available in FY 2026. With an increasing filled product pipeline and surging demand for AI accelerators/GPUs, AMD is set to see strong growth in FY 2025 and investors should consider buying the drop, in my opinion.</p><h2 id=\"id_3356606391\">AMD’s valuation implies a near-50% discount to 1-year average P/E</h2><p>Both Nvidia’s and AMD&#39;s valuation corrected to the downside this week, but AMD is in more of a downtrend than Nvidia, despite the ramp in the Data Center business. AMD is currently priced at a forward price-to-earnings ratio of 16.6X (forward meaning FY 2026 earnings). After Nvidia’s share price slumped 17% on Monday and recovered 9% again on Tuesday in a strong recovery rally, the semiconductor company is valued at a forward earnings multiplier of 29.0X.</p><p>AMD traded at an average 1-year P/E ratio of 30.8X which means the current valuation is about 46% below the valuation average of the last year... indicating that a major, unjustified change in investor sentiment has taken hold that is not defensible, in my opinion, based off of the strength of AMD&#39;s fundamentals.</p><p>While investors may have been overly bullish on AMD at the beginning of the firm&#39;s Instinct ramp in the first half of FY 2024, I believe the pendulum has swung too far to the other side, creating a kind of contrarian investment setup. In my last work on AMD, I calculated a fair value of AMD of at least $216 per-share, which I still believe is a realistic long-term value for the chipmaker. If AMD were to revalue to its 1-year average P/E ratio, shares could be valued at $212 per-share, which is very close to my longer-term valuation target for the chipmaker.</p><p>While AMD may be out of favor for now due to a range of reasons -- stock down-grades, uncertain impact of DeepSeek and other models, such as Alibaba&#39;s Qwen 2.5-VL, and an underappreciated Data Center ramp -- I believe the long-term outlook for AMD (and Nvidia) is one that will be defined by gradually increasing demand for higher GPU/AI accelerator shipments. This is set to benefit AMD as well as Nvidia and with AMD also set to report earnings next week, the chipmaker could have a revaluation catalyst as well.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c4a87490b99bb91814296f6340fc3497\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><h2 id=\"id_3644382295\">Risks with AMD</h2><p>The biggest risk for AMD is a potential shrinking of the growth advantage over Nvidia that the company has achieved, especially in the last two quarters, in the Data Center segment. AMD is still going to benefit from growing chip sales and the appearance of DeepSeek, in my opinion, is not fundamentally changing the outlook for AMD&#39;s AI accelerator shipments... which I continue to expect to ramp up drastically in FY 2025. What would change my mind about AMD is if the company were to see moderating growth in Data Centers and its gross margins declined in FY 2025.</p><h2 id=\"id_2988244293\">Final thoughts</h2><p>DeepSeek is a new AI model that made a major splash this week. However, the appearance of this model indicates to me that demand for AI accelerators is going to <em>increase</em>, not <em>decrease</em> going forward. Lower compute intensity will further innovation in the market for GPUs and AI accelerators, which should also help AMD ramp up shipments in FY 2025, especially with new models slated to get released.</p><p>Companies, especially in the U.S., will continue to need U.S.-manufactured AI GPU’s and accelerators in order to run the latest AI models and applications. In my opinion, DeepSeek as well as other AI models like Alibaba&#39;s Qwen 2.5-VL will only accelerate the transition to more powerful AI models long term, which means demand for chips will also grow. In terms of valuation, I believe the pendulum has too far swung to the bearish side and AMD may now be in a textbook contrarian investment setup.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>AMD: Why I Doubled My Position After DeepSeek Sell-Off</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAMD: Why I Doubled My Position After DeepSeek Sell-Off\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-31 19:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMD":"美国超微公司"},"source_url":"https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1135018317","content_text":"SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the market is irrational and AMD is gaining ground in the AI accelerator market with surging Data Center revenues.AMD's aggressive AI investments are paying off, showing significant Data Center revenue growth, and the stock is trading at a near-50% discount to its historical P/E ratio.Despite DeepSeek's market impact, I remain confident in AMD's AI accelerators' demand, making AMD shares attractively priced amid recent downgrades.Shares of AMD tumbled to a fresh 1-year low on Tuesday after an AI start-up company named DeepSeek made global news for its latest AI chat assistant. AMD, just like Nvidia (NVDA), slumped on Monday on the DeepSeek news which triggered panicked headlines and deep concerns in some parts of the stock market about AI spending and GPU sales. However, I believe not much is going to change for AMD or Nvidia, and both companies are going to continue to see surging demand for their AI products. While I still like Nvidia a lot due to its moat in the AI GPU market, AMD has seen highly encouraging momentum in the Data Center segment and shares are now trading at a near-50% discount to the 1-year average P/E ratio, indicating that sentiment has swung too much to the bearish side... which may reveal a contrarian investment setup!Data by YChartsPrevious ratingI previously called attention to AMD’s already low valuation in my work -- The Valuation Makes No Sense -- which was published last month and well before the recent DeepSeek disaster that shook up AI stocks. While DeepSeek made a splash, I believe AMD and Nvidia are going to see increasing demand for their GPUs and AI accelerators going forward, and the DeepSeek appearance is not going to change this. AMD also held up much better than Nvidia during the latest sell-off, indicating that investors may be too bearish on the chipmaker.Why I doubled down on AMD and increased my position by 2x after the DeepSeek newsI doubled my position in AMD this week, mainly because the market currently does not seem to be very forward-looking and rational when it comes to AI stocks. DeepSeek made global headlines this week for the efficiency of its AI model, which caused valuations for AI companies like Nvidia or AMD to tumble. Additionally, AMD attracted another down-grade this week which weighed on the company's valuation. However, AMD didn't drop as much as Nvidia on Monday, indicating that we may see a bottom for AMD's shares very soon.AMD is now so attractively priced, in my opinion, that the valuation incorporates an excess safety margin. This is mainly due to the fact that AMD has really started to excel in the Data Center business in the last two quarters, and I don't believe AMD gets enough credit for this achievement. To remind investors, AMD generated 25% Q/Q Data Center revenue growth in the quarter ending September 2024 compared to a 17% Q/Q growth rate for Nvidia.The difference in Data Center growth between AMD and Nvidia was 8 PP in the last quarter and 5 PP in the quarter before that (in favor of AMD). As recently as the first-quarter of AMD’s FY 2024, Nvidia had a more than 20 PP Q/Q growth advantage over AMD. In other words, AMD has fundamentally caught up to Nvidia in Data Center growth, although the consolidated top line does not yet show the massive progress that AMD has made.Nvidia also has a distinct advantage over AMD in terms of operating cash flow and net income growth, but given AMD's Instinct ramp in FY 2025, the chipmaker has considerably more potential for growth in the Data Center segment than Nvidia, in my opinion.Data by YChartsThe reason is that AMD has made aggressive investments into its AI accelerator pipeline, which has started to pay off in 2024... and the current year could show many more positive surprises. Nvidia has still a considerable advantage in terms of the pure size of its gross profits and its gross margins, but AMD is starting to catch up and the company's earnings report for the fourth-quarter, expected on February 4, 2025, is likely going to be a very strong one, in terms of both Data Center top line and earnings growth. In the most recent quarter, September, AMD generated a gross margin of 50% which was about one-third lower than Nvidia's margins. With the launch of higher-price AI accelerators in the Instinct series, however, AMD has a strong catalyst for sequential gross profit (margin) growth when it reports earnings next week.Data by YChartsFor the fourth-quarter, AMD is expected to report $1.09 per-share in earnings, which would calculate to a 41% year-over-year growth rate. Earnings momentum is still very much positive, but earnings estimates have started to fall lately, as more analysts expect gains from AMD's Instinct ramp to fall into FY 2025. I believe, however, as Instinct chip deliveries ramped up in Q4'24, that AMD has an excellent chance to beat low EPS estimates and could see a strong reaction when it reports earnings on February 4, 2025.Seeking AlphaAMD statement on DeepSeek and product pipelineAMD issued a statement after DeepSeek's splash this week, saying that DeepSeek R1 can be run on AMD Ryzen AI CPUs and Radeon GPUs. DeepSeek shows that AI models are getting more efficient and, likely, cheaper, which means that demand for AI accelerators and GPUs is only going to grow. Nvidia also issued a statement in which it indicated that the appearance of DeepSeek is an opportunity for growth in the GPU market, rather than a threat.AMD is obviously set to benefit from these strengthening trends with its new AMD Instinct MI325X and MI350X accelerators, which AMD is going to ramp in FY 2025. The chipmaker has also previously stated that it will move towards a faster product-release cycle in order to bring technological progress to consumers and enterprise customers at a faster pace. The MI350X is set to launch in the second half of FY 2025 and the next-gen MI400X AI accelerator will likely be available in FY 2026. With an increasing filled product pipeline and surging demand for AI accelerators/GPUs, AMD is set to see strong growth in FY 2025 and investors should consider buying the drop, in my opinion.AMD’s valuation implies a near-50% discount to 1-year average P/EBoth Nvidia’s and AMD's valuation corrected to the downside this week, but AMD is in more of a downtrend than Nvidia, despite the ramp in the Data Center business. AMD is currently priced at a forward price-to-earnings ratio of 16.6X (forward meaning FY 2026 earnings). After Nvidia’s share price slumped 17% on Monday and recovered 9% again on Tuesday in a strong recovery rally, the semiconductor company is valued at a forward earnings multiplier of 29.0X.AMD traded at an average 1-year P/E ratio of 30.8X which means the current valuation is about 46% below the valuation average of the last year... indicating that a major, unjustified change in investor sentiment has taken hold that is not defensible, in my opinion, based off of the strength of AMD's fundamentals.While investors may have been overly bullish on AMD at the beginning of the firm's Instinct ramp in the first half of FY 2024, I believe the pendulum has swung too far to the other side, creating a kind of contrarian investment setup. In my last work on AMD, I calculated a fair value of AMD of at least $216 per-share, which I still believe is a realistic long-term value for the chipmaker. If AMD were to revalue to its 1-year average P/E ratio, shares could be valued at $212 per-share, which is very close to my longer-term valuation target for the chipmaker.While AMD may be out of favor for now due to a range of reasons -- stock down-grades, uncertain impact of DeepSeek and other models, such as Alibaba's Qwen 2.5-VL, and an underappreciated Data Center ramp -- I believe the long-term outlook for AMD (and Nvidia) is one that will be defined by gradually increasing demand for higher GPU/AI accelerator shipments. This is set to benefit AMD as well as Nvidia and with AMD also set to report earnings next week, the chipmaker could have a revaluation catalyst as well.Data by YChartsRisks with AMDThe biggest risk for AMD is a potential shrinking of the growth advantage over Nvidia that the company has achieved, especially in the last two quarters, in the Data Center segment. AMD is still going to benefit from growing chip sales and the appearance of DeepSeek, in my opinion, is not fundamentally changing the outlook for AMD's AI accelerator shipments... which I continue to expect to ramp up drastically in FY 2025. What would change my mind about AMD is if the company were to see moderating growth in Data Centers and its gross margins declined in FY 2025.Final thoughtsDeepSeek is a new AI model that made a major splash this week. However, the appearance of this model indicates to me that demand for AI accelerators is going to increase, not decrease going forward. Lower compute intensity will further innovation in the market for GPUs and AI accelerators, which should also help AMD ramp up shipments in FY 2025, especially with new models slated to get released.Companies, especially in the U.S., will continue to need U.S.-manufactured AI GPU’s and accelerators in order to run the latest AI models and applications. In my opinion, DeepSeek as well as other AI models like Alibaba's Qwen 2.5-VL will only accelerate the transition to more powerful AI models long term, which means demand for chips will also grow. In terms of valuation, I believe the pendulum has too far swung to the bearish side and AMD may now be in a textbook contrarian investment setup.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":398486994854336,"gmtCreate":1738312258994,"gmtModify":1738312262987,"author":{"id":"3586496569555403","authorId":"3586496569555403","name":"sentosa","avatar":"https://static.tigerbbs.com/38bcd9864ecb6b17ff9516da7db00132","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3586496569555403","authorIdStr":"3586496569555403"},"htmlText":"Buy now accumulate&nbsp;","listText":"Buy now accumulate&nbsp;","text":"Buy now accumulate","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/398486994854336","repostId":1135018317,"repostType":2,"repost":{"id":"1135018317","kind":"news","pubTimestamp":1738321988,"share":"https://ttm.financial/m/news/1135018317?lang=&edition=fundamental","pubTime":"2025-01-31 19:13","market":"us","language":"en","title":"AMD: Why I Doubled My Position After DeepSeek Sell-Off","url":"https://stock-news.laohu8.com/highlight/detail?id=1135018317","media":"Seeking Alpha","summary":"SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the m","content":"<html><head></head><body><h2 id=\"id_2301459152\">Summary</h2><ul style=\"\"><li><p>AMD shares fell to a 1-year low this week due to DeepSeek&#39;s AI chat assistant news, but I believe demand for AMD&#39;s AI products will remain strong in 2025.</p></li><li><p>I doubled my AMD position because the market is irrational and AMD is gaining ground in the AI accelerator market with surging Data Center revenues.</p></li><li><p>AMD&#39;s aggressive AI investments are paying off, showing significant Data Center revenue growth, and the stock is trading at a near-50% discount to its historical P/E ratio.</p></li><li><p>Despite DeepSeek&#39;s market impact, I remain confident in AMD&#39;s AI accelerators&#39; demand, making AMD shares attractively priced amid recent downgrades.</p></li></ul><p>Shares of <a href=\"https://laohu8.com/S/AMD\">AMD</a> tumbled to a fresh 1-year low on Tuesday after an AI start-up company named DeepSeek made global news for its latest AI chat assistant. AMD, just like Nvidia (NVDA), slumped on Monday on the DeepSeek news which triggered panicked headlines and deep concerns in some parts of the stock market about AI spending and GPU sales. However, I believe not much is going to change for AMD or Nvidia, and both companies are going to continue to see surging demand for their AI products. While I still like Nvidia a lot due to its moat in the AI GPU market, AMD has seen highly encouraging momentum in the Data Center segment and shares are now trading at a near-50% discount to the 1-year average P/E ratio, indicating that sentiment has swung too much to the bearish side... which may reveal a contrarian investment setup!</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b92568f58f6bae4fc57adf24dba5bf48\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"439\"/><span>Data by YCharts</span></p><h2 id=\"id_1073761465\">Previous rating</h2><p>I previously called attention to AMD’s already low valuation in my work -- The Valuation Makes No Sense -- which was published last month and well before the recent DeepSeek disaster that shook up AI stocks. While DeepSeek made a splash, I believe AMD and Nvidia are going to see increasing demand for their GPUs and AI accelerators going forward, and the DeepSeek appearance is not going to change this. AMD also held up much better than Nvidia during the latest sell-off, indicating that investors may be too bearish on the chipmaker.</p><h2 id=\"id_692351424\">Why I doubled down on AMD and increased my position by 2x after the DeepSeek news</h2><p>I doubled my position in AMD this week, mainly because the market currently does not seem to be very forward-looking and rational when it comes to AI stocks. DeepSeek made global headlines this week for the efficiency of its AI model, which caused valuations for AI companies like Nvidia or AMD to tumble. Additionally, AMD attracted another down-grade this week which weighed on the company&#39;s valuation. However, AMD didn&#39;t drop as much as Nvidia on Monday, indicating that we may see a bottom for AMD&#39;s shares very soon.</p><p>AMD is now so attractively priced, in my opinion, that the valuation incorporates an excess safety margin. This is mainly due to the fact that AMD has really started to excel in the Data Center business in the last two quarters, and I don&#39;t believe AMD gets enough credit for this achievement. To remind investors, AMD generated 25% Q/Q Data Center revenue growth in the quarter ending September 2024 compared to a 17% Q/Q growth rate for Nvidia.</p><p>The difference in Data Center growth between AMD and Nvidia was 8 PP in the last quarter and 5 PP in the quarter before that (in favor of AMD). As recently as the first-quarter of AMD’s FY 2024, Nvidia had a more than 20 PP Q/Q growth advantage over AMD. In other words, AMD has fundamentally caught up to Nvidia in Data Center growth, although the consolidated top line does not yet show the massive progress that AMD has made.</p><p>Nvidia also has a distinct advantage over AMD in terms of operating cash flow and net income growth, but given AMD&#39;s Instinct ramp in FY 2025, the chipmaker has considerably more potential for growth in the Data Center segment than Nvidia, in my opinion.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/599db606c3caf04f8ef930350684fae5\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><p>The reason is that AMD has made aggressive investments into its AI accelerator pipeline, which has started to pay off in 2024... and the current year could show many more positive surprises. Nvidia has still a considerable advantage in terms of the pure size of its gross profits and its gross margins, but AMD is starting to catch up and the company&#39;s earnings report for the fourth-quarter, expected on February 4, 2025, is likely going to be a very strong one, in terms of both Data Center top line and earnings growth. In the most recent quarter, September, AMD generated a gross margin of 50% which was about one-third lower than Nvidia&#39;s margins. With the launch of higher-price AI accelerators in the Instinct series, however, AMD has a strong catalyst for sequential gross profit (margin) growth when it reports earnings next week.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ca4584911e4e2d2ad17038339713c28c\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><p>For the fourth-quarter, AMD is expected to report $1.09 per-share in earnings, which would calculate to a 41% year-over-year growth rate. Earnings momentum is still very much positive, but earnings estimates have started to fall lately, as more analysts expect gains from AMD&#39;s Instinct ramp to fall into FY 2025. I believe, however, as Instinct chip deliveries ramped up in Q4&#39;24, that AMD has an excellent chance to beat low EPS estimates and could see a strong reaction when it reports earnings on February 4, 2025.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2db76ac8e7a0f1000d262fb0023cdeb1\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"229\"/><span>Seeking Alpha</span></p><h2 id=\"id_1031374504\">AMD statement on DeepSeek and product pipeline</h2><p>AMD issued a statement after DeepSeek&#39;s splash this week, saying that DeepSeek R1 can be run on AMD Ryzen AI CPUs and Radeon GPUs. DeepSeek shows that AI models are getting more efficient and, likely, cheaper, which means that demand for AI accelerators and GPUs is only going to grow. Nvidia also issued a statement in which it indicated that the appearance of DeepSeek is an opportunity for growth in the GPU market, rather than a threat.</p><p>AMD is obviously set to benefit from these strengthening trends with its new AMD Instinct MI325X and MI350X accelerators, which AMD is going to ramp in FY 2025. The chipmaker has also previously stated that it will move towards a faster product-release cycle in order to bring technological progress to consumers and enterprise customers at a faster pace. The MI350X is set to launch in the second half of FY 2025 and the next-gen MI400X AI accelerator will likely be available in FY 2026. With an increasing filled product pipeline and surging demand for AI accelerators/GPUs, AMD is set to see strong growth in FY 2025 and investors should consider buying the drop, in my opinion.</p><h2 id=\"id_3356606391\">AMD’s valuation implies a near-50% discount to 1-year average P/E</h2><p>Both Nvidia’s and AMD&#39;s valuation corrected to the downside this week, but AMD is in more of a downtrend than Nvidia, despite the ramp in the Data Center business. AMD is currently priced at a forward price-to-earnings ratio of 16.6X (forward meaning FY 2026 earnings). After Nvidia’s share price slumped 17% on Monday and recovered 9% again on Tuesday in a strong recovery rally, the semiconductor company is valued at a forward earnings multiplier of 29.0X.</p><p>AMD traded at an average 1-year P/E ratio of 30.8X which means the current valuation is about 46% below the valuation average of the last year... indicating that a major, unjustified change in investor sentiment has taken hold that is not defensible, in my opinion, based off of the strength of AMD&#39;s fundamentals.</p><p>While investors may have been overly bullish on AMD at the beginning of the firm&#39;s Instinct ramp in the first half of FY 2024, I believe the pendulum has swung too far to the other side, creating a kind of contrarian investment setup. In my last work on AMD, I calculated a fair value of AMD of at least $216 per-share, which I still believe is a realistic long-term value for the chipmaker. If AMD were to revalue to its 1-year average P/E ratio, shares could be valued at $212 per-share, which is very close to my longer-term valuation target for the chipmaker.</p><p>While AMD may be out of favor for now due to a range of reasons -- stock down-grades, uncertain impact of DeepSeek and other models, such as Alibaba&#39;s Qwen 2.5-VL, and an underappreciated Data Center ramp -- I believe the long-term outlook for AMD (and Nvidia) is one that will be defined by gradually increasing demand for higher GPU/AI accelerator shipments. This is set to benefit AMD as well as Nvidia and with AMD also set to report earnings next week, the chipmaker could have a revaluation catalyst as well.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c4a87490b99bb91814296f6340fc3497\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"525\"/><span>Data by YCharts</span></p><h2 id=\"id_3644382295\">Risks with AMD</h2><p>The biggest risk for AMD is a potential shrinking of the growth advantage over Nvidia that the company has achieved, especially in the last two quarters, in the Data Center segment. AMD is still going to benefit from growing chip sales and the appearance of DeepSeek, in my opinion, is not fundamentally changing the outlook for AMD&#39;s AI accelerator shipments... which I continue to expect to ramp up drastically in FY 2025. What would change my mind about AMD is if the company were to see moderating growth in Data Centers and its gross margins declined in FY 2025.</p><h2 id=\"id_2988244293\">Final thoughts</h2><p>DeepSeek is a new AI model that made a major splash this week. However, the appearance of this model indicates to me that demand for AI accelerators is going to <em>increase</em>, not <em>decrease</em> going forward. Lower compute intensity will further innovation in the market for GPUs and AI accelerators, which should also help AMD ramp up shipments in FY 2025, especially with new models slated to get released.</p><p>Companies, especially in the U.S., will continue to need U.S.-manufactured AI GPU’s and accelerators in order to run the latest AI models and applications. In my opinion, DeepSeek as well as other AI models like Alibaba&#39;s Qwen 2.5-VL will only accelerate the transition to more powerful AI models long term, which means demand for chips will also grow. In terms of valuation, I believe the pendulum has too far swung to the bearish side and AMD may now be in a textbook contrarian investment setup.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>AMD: Why I Doubled My Position After DeepSeek Sell-Off</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAMD: Why I Doubled My Position After DeepSeek Sell-Off\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-31 19:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMD":"美国超微公司"},"source_url":"https://seekingalpha.com/article/4753256-amd-why-i-doubled-my-position-after-deepseek-sell-off","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1135018317","content_text":"SummaryAMD shares fell to a 1-year low this week due to DeepSeek's AI chat assistant news, but I believe demand for AMD's AI products will remain strong in 2025.I doubled my AMD position because the market is irrational and AMD is gaining ground in the AI accelerator market with surging Data Center revenues.AMD's aggressive AI investments are paying off, showing significant Data Center revenue growth, and the stock is trading at a near-50% discount to its historical P/E ratio.Despite DeepSeek's market impact, I remain confident in AMD's AI accelerators' demand, making AMD shares attractively priced amid recent downgrades.Shares of AMD tumbled to a fresh 1-year low on Tuesday after an AI start-up company named DeepSeek made global news for its latest AI chat assistant. AMD, just like Nvidia (NVDA), slumped on Monday on the DeepSeek news which triggered panicked headlines and deep concerns in some parts of the stock market about AI spending and GPU sales. However, I believe not much is going to change for AMD or Nvidia, and both companies are going to continue to see surging demand for their AI products. While I still like Nvidia a lot due to its moat in the AI GPU market, AMD has seen highly encouraging momentum in the Data Center segment and shares are now trading at a near-50% discount to the 1-year average P/E ratio, indicating that sentiment has swung too much to the bearish side... which may reveal a contrarian investment setup!Data by YChartsPrevious ratingI previously called attention to AMD’s already low valuation in my work -- The Valuation Makes No Sense -- which was published last month and well before the recent DeepSeek disaster that shook up AI stocks. While DeepSeek made a splash, I believe AMD and Nvidia are going to see increasing demand for their GPUs and AI accelerators going forward, and the DeepSeek appearance is not going to change this. AMD also held up much better than Nvidia during the latest sell-off, indicating that investors may be too bearish on the chipmaker.Why I doubled down on AMD and increased my position by 2x after the DeepSeek newsI doubled my position in AMD this week, mainly because the market currently does not seem to be very forward-looking and rational when it comes to AI stocks. DeepSeek made global headlines this week for the efficiency of its AI model, which caused valuations for AI companies like Nvidia or AMD to tumble. Additionally, AMD attracted another down-grade this week which weighed on the company's valuation. However, AMD didn't drop as much as Nvidia on Monday, indicating that we may see a bottom for AMD's shares very soon.AMD is now so attractively priced, in my opinion, that the valuation incorporates an excess safety margin. This is mainly due to the fact that AMD has really started to excel in the Data Center business in the last two quarters, and I don't believe AMD gets enough credit for this achievement. To remind investors, AMD generated 25% Q/Q Data Center revenue growth in the quarter ending September 2024 compared to a 17% Q/Q growth rate for Nvidia.The difference in Data Center growth between AMD and Nvidia was 8 PP in the last quarter and 5 PP in the quarter before that (in favor of AMD). As recently as the first-quarter of AMD’s FY 2024, Nvidia had a more than 20 PP Q/Q growth advantage over AMD. In other words, AMD has fundamentally caught up to Nvidia in Data Center growth, although the consolidated top line does not yet show the massive progress that AMD has made.Nvidia also has a distinct advantage over AMD in terms of operating cash flow and net income growth, but given AMD's Instinct ramp in FY 2025, the chipmaker has considerably more potential for growth in the Data Center segment than Nvidia, in my opinion.Data by YChartsThe reason is that AMD has made aggressive investments into its AI accelerator pipeline, which has started to pay off in 2024... and the current year could show many more positive surprises. Nvidia has still a considerable advantage in terms of the pure size of its gross profits and its gross margins, but AMD is starting to catch up and the company's earnings report for the fourth-quarter, expected on February 4, 2025, is likely going to be a very strong one, in terms of both Data Center top line and earnings growth. In the most recent quarter, September, AMD generated a gross margin of 50% which was about one-third lower than Nvidia's margins. With the launch of higher-price AI accelerators in the Instinct series, however, AMD has a strong catalyst for sequential gross profit (margin) growth when it reports earnings next week.Data by YChartsFor the fourth-quarter, AMD is expected to report $1.09 per-share in earnings, which would calculate to a 41% year-over-year growth rate. Earnings momentum is still very much positive, but earnings estimates have started to fall lately, as more analysts expect gains from AMD's Instinct ramp to fall into FY 2025. I believe, however, as Instinct chip deliveries ramped up in Q4'24, that AMD has an excellent chance to beat low EPS estimates and could see a strong reaction when it reports earnings on February 4, 2025.Seeking AlphaAMD statement on DeepSeek and product pipelineAMD issued a statement after DeepSeek's splash this week, saying that DeepSeek R1 can be run on AMD Ryzen AI CPUs and Radeon GPUs. DeepSeek shows that AI models are getting more efficient and, likely, cheaper, which means that demand for AI accelerators and GPUs is only going to grow. Nvidia also issued a statement in which it indicated that the appearance of DeepSeek is an opportunity for growth in the GPU market, rather than a threat.AMD is obviously set to benefit from these strengthening trends with its new AMD Instinct MI325X and MI350X accelerators, which AMD is going to ramp in FY 2025. The chipmaker has also previously stated that it will move towards a faster product-release cycle in order to bring technological progress to consumers and enterprise customers at a faster pace. The MI350X is set to launch in the second half of FY 2025 and the next-gen MI400X AI accelerator will likely be available in FY 2026. With an increasing filled product pipeline and surging demand for AI accelerators/GPUs, AMD is set to see strong growth in FY 2025 and investors should consider buying the drop, in my opinion.AMD’s valuation implies a near-50% discount to 1-year average P/EBoth Nvidia’s and AMD's valuation corrected to the downside this week, but AMD is in more of a downtrend than Nvidia, despite the ramp in the Data Center business. AMD is currently priced at a forward price-to-earnings ratio of 16.6X (forward meaning FY 2026 earnings). After Nvidia’s share price slumped 17% on Monday and recovered 9% again on Tuesday in a strong recovery rally, the semiconductor company is valued at a forward earnings multiplier of 29.0X.AMD traded at an average 1-year P/E ratio of 30.8X which means the current valuation is about 46% below the valuation average of the last year... indicating that a major, unjustified change in investor sentiment has taken hold that is not defensible, in my opinion, based off of the strength of AMD's fundamentals.While investors may have been overly bullish on AMD at the beginning of the firm's Instinct ramp in the first half of FY 2024, I believe the pendulum has swung too far to the other side, creating a kind of contrarian investment setup. In my last work on AMD, I calculated a fair value of AMD of at least $216 per-share, which I still believe is a realistic long-term value for the chipmaker. If AMD were to revalue to its 1-year average P/E ratio, shares could be valued at $212 per-share, which is very close to my longer-term valuation target for the chipmaker.While AMD may be out of favor for now due to a range of reasons -- stock down-grades, uncertain impact of DeepSeek and other models, such as Alibaba's Qwen 2.5-VL, and an underappreciated Data Center ramp -- I believe the long-term outlook for AMD (and Nvidia) is one that will be defined by gradually increasing demand for higher GPU/AI accelerator shipments. This is set to benefit AMD as well as Nvidia and with AMD also set to report earnings next week, the chipmaker could have a revaluation catalyst as well.Data by YChartsRisks with AMDThe biggest risk for AMD is a potential shrinking of the growth advantage over Nvidia that the company has achieved, especially in the last two quarters, in the Data Center segment. AMD is still going to benefit from growing chip sales and the appearance of DeepSeek, in my opinion, is not fundamentally changing the outlook for AMD's AI accelerator shipments... which I continue to expect to ramp up drastically in FY 2025. What would change my mind about AMD is if the company were to see moderating growth in Data Centers and its gross margins declined in FY 2025.Final thoughtsDeepSeek is a new AI model that made a major splash this week. However, the appearance of this model indicates to me that demand for AI accelerators is going to increase, not decrease going forward. Lower compute intensity will further innovation in the market for GPUs and AI accelerators, which should also help AMD ramp up shipments in FY 2025, especially with new models slated to get released.Companies, especially in the U.S., will continue to need U.S.-manufactured AI GPU’s and accelerators in order to run the latest AI models and applications. In my opinion, DeepSeek as well as other AI models like Alibaba's Qwen 2.5-VL will only accelerate the transition to more powerful AI models long term, which means demand for chips will also grow. In terms of valuation, I believe the pendulum has too far swung to the bearish side and AMD may now be in a textbook contrarian investment setup.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":15,"commentSize":2,"repostSize":3,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1135018317"}