Daily Stock Pick: April 25th, 2023

Generative AI is taking the world by storm. But because most people are transfixed by the software’s powerful capabilities, it’s easy to forget that on the back-end – everything is ultimately powered by hardware.

That’s why AI hardware – which was “only” a $10 billion industry in 2021 – is projected to grow to $89 billion by 2030. That’s a growth rate of 27.5% a year. And based on how quickly generative AI is gaining steam, this could very well be an extremely conservative estimate.

The winner from this growth is the semiconductor industry. But as we dive into the details, we see that some semiconductor stocks are better positioned than others.

And that’s exactly what we’re sharing in today’s daily stock pick – a proven company that’s being severely undervalued by the market.

Advanced Micro Devices Inc. (AMD)

With a market cap of over $150 billion, almost every investor knows AMD.

But what’s surprising is that AMD is NOT the current leader in the AI hardware race. That accolade goes to Nvidia. Most large language models (LLMs) use a GPU that is most likely to come from Nvidia.

So why is today’s stock pick AMD and not NVDA?

The answer comes down to price. NVDA is the market leader – but that has also been reflected in its price.

Right now NVDA is trading at over 25 times sales, while AMD is only trading at over 6 times sales.

Beyond the AI catalyst, AMD also has several other positive things going for it. 

It saw an impressive 44% increase in revenue for 2022 despite the slowing PC market – beating analyst expectations – and giving it a consensus “Buy” rating. It’s also strengthened several of its partnerships, namely with German software giant SAP.

AMD is due to report its earnings next Tuesday, on May 2. If it once again comes in ahead of expectations, it could very well trigger a move higher.

To your wealth,
Felix @ Ace of Investing