Advanced Micro Devices (AMD) has been a prominent player in the semiconductor industry, capitalizing on the growing demand for high-performance computing, artificial intelligence (AI), and data center solutions. However, its stock has faced significant challenges in 2025, declining 16% this year, as of yesterday’s closing price of $100.59.

AMD’s stock has seen a significant 55% drop from its all-time high of $227 a share in March of 2024. The stock’s decline has been driven by several factors, including underwhelming progress in the AI chip market compared to rival Nvidia. Despite strong growth in its data center segment, AMD’s AI revenue outlook for early 2025 has not met lofty expectations, leading to sell-offs after earnings reports.

Proposed U.S. tariffs, particularly on Chinese goods, have raised concerns about semiconductor demand. AMD expects a potential $800 million hit from export restrictions to China, while new tariffs could increase costs for its supply chain, given its reliance on Asian manufacturing. Additionally, China’s push for domestic alternatives, such as Huawei’s 910C AI chip, poses a competitive threat.

While AMD’s data center and client segments have performed strongly, its gaming and embedded segments have been drags, with gaming revenue down 59% year-over-year in 4Q 2024. This uneven performance has tempered investor enthusiasm. Despite these challenges, AMD’s valuation appears attractive. At 21 times forward earnings and 14 times 2026 earnings, the stock trades at a discount to the Nasdaq-100’s forward earnings multiple of 30, suggesting potential undervaluation relative to its growth prospects.

AMD’s 4Q 2024 earnings, reported on February 4, 2025, showcased both strengths and areas of concern. Revenue was $7.66 billion, up 24% year-over-year, beating analyst estimates of $7.53 billion. Adjusted EPS was $1.09, slightly above the consensus of $1.08. Data Center Segment revenue reached a record $3.86 billion, up 69% year-over-year, driven by AMD Instinct GPU shipments and EPYC CPU sales. However, this fell short of analyst expectations of $4.14 billion.

For 1Q 2025, AMD expects revenue of approximately $7.1 billion (±$300 million), a 30% year-over-year increase but a 7% sequential decline due to seasonality. Non-GAAP gross margin is projected at 54%. AMD’s data center segment is poised for continued strength, driven by the MI325X GPU (launched in 1Q 2025) and the upcoming MI350 series (2H 2025). CEO Lisa Su projects “strong double-digit percentage revenue and EPS growth” for 2025, with the data center AI business potentially scaling to “tens of billions” in the coming years.

The Option Market is pricing in a ± 8% ($8.20) move in the shares post earnings as of Monday’s close. On a technical basis, the stock broke through its 50-Day Simple moving average yesterday near $98 so momentum has been to the upside recently. Even with the bar set low for AMD, guidance may be the key to today’s earnings report as tariff impacts and competition will set the tone for the stock.

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