Predicting the Future Position of AMD Shares in the Next Three Years
Over the past three years, Advanced Micro Devices (AMD) investors have had a forgettable experience, with the company's shares declining by 5%. Meanwhile, the PHLX Semiconductor Sector index has recorded an impressive 36% growth. AMD's struggles can be attributed to missed opportunities in the artificial intelligence (AI) market and reliance on the personal computer and gaming markets for a significant portion of its revenue.
The sluggish PC market and the gaming console market's anemic 2.4% growth in 2024 have added to AMD's challenges. However, there are reasons to be optimistic about AMD's future. The PC market is expected to bounce back, with the IDC forecasting a 4.3% growth in 2023, driven by the end of support for Windows 10 and the growing adoption of AI-capable PCs. Moreover, IDC expects the PC market to grow at a 1.4% annual rate through 2028, with AI PCs accounting for 60% of the market by 2027.
AMD is well-positioned to capitalize on this growth. The company is partnering with Dell Technologies, which will use AMD's CPUs in its commercial offerings. AMD's AI-capable CPUs will also power over 100 commercial PC platforms in 2025. AMD's share of the client CPU market has been on the rise, with the company controlling 23.9% of the market at the end of Q3 2024, up from 19.4% in the previous year.
AMD's data center business has also been performing well. The segment's revenue grew by 122% year over year in Q3 2024 due to increased demand for AMD's data center graphics cards and the company's improving share of the server CPU market. AMD is forecasting 60% annual growth in its total addressable market (TAM) for data center AI chips through 2028, with a target of $500 billion.
Despite challenges in the gaming segment, AMD expects to see a recovery as Microsoft and Sony launch their next-generation gaming consoles in the next three years. AMD manufactures the semi-custom chips that power these consoles and is expected to remain the supplier for the next-gen consoles.
In summary, AMD's fortunes are set to improve over the next three years, with strong growth expected in the PC market, data center segment, and potential recovery in the gaming segment. AMD's partnership with Dell Technologies and increasing market share in the client CPU market also bode well for the company's future.
AMD's investors might find investing in the company more rewarding in the near future, given the likely growth in the PC market. The finance sector should take note of AMD's partnership with Dell Technologies and its increasing share in the client CPU market. With the gaming console market projected to see a 2.4% growth in 2024, and AMD as the supplier for the next-gen consoles, the company's gaming segment is likely to recover. The anticipated 1.4% annual growth in the PC market through 2028, driven by AI-capable PCs, and AMD's strong position in data center AI chips, provide substantial gravy for AMD's growth.
