Two Stocks Experiencing Significant Drops of 40% and 72%, Offering Potential Buying Opportunities
Two Stocks Experiencing Significant Drops of 40% and 72%, Offering Potential Buying Opportunities
As December draws nearer, 2024 is almost at its end, with 2025 just around the corner. The market has experienced an exceptional surge, with tech giants like Nvidia, Palantir, and Apple reaching new valuation peaks.
However, there are also technology stocks that are trading below their previous heights, and investors might be missing out on substantial returns by overlooking these undervalued companies.
If you're seeking investments with high potential returns in 2025 and beyond, read on to discover why two contributors from Fool.com believe these undervalued stocks are excellent buys at present.
AMD: An Undervalued AI Play
*Keith Noonan: Advanced Micro Devices (AMD* 0.10%) is a creator of central processing units (CPUs) and GPUs for personal computers and data centers. The company's stock has gained approximately 182% over the past five years due to successful business operations and excitement about its potential to capitalize on the same explosive, AI-driven growth that has boosted Nvidia's returns.
However, AMD has seen a slower adoption of AI-related processors than some investors had anticipated, which has led to a significant stock price drop. As of now, AMD's share price is down roughly 40% from its all-time high, which it reached earlier this year.
Despite the market's strong performance, AMD's stock has declined over the past few months, and it hasn't managed to recover from the sell-offs triggered by its third-quarter earnings release in October. During this period, AMD's revenue grew by roughly 18% year over year, reaching $6.8 billion. Meanwhile, its non-GAAP (adjusted) earnings per share increased by 31% compared to the previous year.
Although AMD will continue to have a strong presence in the market for processors used in gaming and personal computers, its data center segment has become critical to the stock's performance. The AI-related segment saw sales increase to $3.5 billion during the last quarter, a 122% year-over-year growth and a 25% sequential quarterly growth. The performance exceeded analysts' expectations and resulted in overall sales and earnings surpassing targets in the quarter.
AMD has been cautious in issuing guidance lately, and it isn't surprising to see substantial near-term gains triggered by Q4 results that surpass broad expectations. However, for long-term investors, the business remains well-positioned to benefit from the unfolding AI revolution.
Although AMD's competitive position in the lucrative GPU category isn't as strong as Nvidia's, the stock's current undervaluation presents an opportunity for investors to buy shares at cheaper prices and potentially see significant returns.
Aehr Test Systems: An Opportunity for Adventurous Investors
*Lee Samaha:* It's undeniable that the year hasn't been kind to the provider of burn-in testing equipment for the chip industry, Aehr Test Systems (AEHR** 1.35%). Aehr Test Systems creates silicon carbide chip testing equipment, and its primary growth market relies on its use in electric vehicles (EVs). Silicon carbide chips offer advantages in power electronics, making them suitable for EVs.
However, growth expectations for both the chips and Aehr's sales have been scaled back this year due to the slowdown in EV sales, which has forced automakers to delay their investment in production lines. As a result, Aehr's share price is down by approximately 72% from its all-time high as of now.
While the slowdown, primarily due to relatively high interest rates, is likely to be short-lived, there's no denying that EVs are the future of the transportation industry. Additionally, Aehr recently signed an agreement to sell an initial $10 million worth of equipment to an artificial intelligence customer. This deal helps diversify Aehr's end markets and customer base, reducing the stock's risk.
Given the company's success in expanding into new end markets and a likely recovery in its EV end markets, Aehr Test Systems has significant growth potential. Now might be a good time to consider investing in this undervalued stock.
- Investors looking for opportunities with high potential returns in the field of finance, especially in the technology sector, might want to consider undervalued stocks like AMD due to its strong position in the AI revolution and its competitive GPU category.
- For those seeking adventurous investments in finance, Aehr Test Systems, despite its current share price drop, presents a promising opportunity due to its focus on silicon carbide chip testing equipment, its agreement with an artificial intelligence customer, and the growth potential of the EV market.