Cathie Wood's ETFs bought more than 30,000 shares of AMD (AMD) last week. With AMD's AI chip business flourishing, its overall revenue growing rapidly, and its stock changing hands at a relatively low valuation, AMD stock looks attractive for investors.

About AMD Stock

Based in Santa Clara, California, AMD develops semiconductors that are used in computers, data centers, and gaming. Its graphics processing units (GPUs) are increasingly utilized to develop AI. 

In the fourth quarter, the chipmaker's net income, excluding certain items, jumped 42% to $2.5 billion, compared with $1.78 billion in the same period a year earlier. The company's revenue advanced 34% year-over-year (YoY) to $10.27 billion.

Changing hands with a forward price-earnings ratio of 36, AMD has a market capitalization of $320.5 billion.

As of the morning of Feb. 25, the shares had risen 6% in the previous five days but were down 18% in the last month. In the previous 12 months, they had jumped 105%.

AMD's AI-Chip Business Is Thriving, and the Trend Is Poised to Continue

My research, AMD's Q4 results, and recent events indicate that AMD's AI-chip business is greatly strengthening, while the latter trend looks poised to continue over the long term. 

Last October, AMD executive Andrew Dieckmann reported that “I can tell you that in our customer engagements, especially regarding inference workloads, we have yet to find a single workload that we cannot outperform (the AI chips of) NVIDIA on.” While Dieckmann also noted that “AMD doesn’t always outperform NVIDIA” he added that “if we optimize for a specific solution, we can beat” Nvidia (NVDA). 

Since I've generally found that large, reputable U.S. companies do not lie about their performance and capabilities, I think that Dieckmann was being truthful.

Further, recent events provide evidence to support the executive's statements. First, AMD, showing great confidence in its ability to compete with NVDA, reportedly was preparing in July to “raise the pricing of its Instinct MI350 AI accelerator from $15,000 to a $25,000 price tag, which marks a ~70% increase.” Secondly, in November, AMD CEO Lisa Su predicted that its AI data center business would expand at an annual rate of about 80% in “the next three to five years,” enabling its overall top line during that period to increase roughly 35% per year.

Moreover, indicating that Su's forecast was on target, the firm's overall revenue surged 34% YoY in Q4. And the 42% jump in the firm's bottom line last quarter also strongly suggests that its AI-chip business is growing by leaps and bounds.

Finally, in the last several months, AMD has made multiple, major, multi-year deals that involve the firm selling its chips to large tech companies. Most recently, Meta (META) agreed to buy a huge 6 gigawatts of AMD's AI chips. Among the other major tech firms that have done significant deals with AMD relatively recently are Oracle (ORCL) and OpenAI. 

AMD's huge, multi-year AI-chip deals with multiple large tech firms and the apparent ability of its offerings to successfully compete with those of Nvidia leave AMD's AI-chip business well-positioned to continue thriving for the next several years.

The Bottom Line on AMD Stock

The company's AI-chip business appears to be taking off and looks well-positioned to perform very well in the next several years, while the stock's valuation is quite reasonable, given AMD's strong growth and excellent outlook. Therefore, AMD looks like a buy for investors at this point.