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1 Semiconductor Giant to Consider Buying Today

By Demitri Kalogeropoulos and Jose Najarro – Jan 13, 2022 at 2:49PM

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Gaming, PC, and datacenter niches all promise to lift sales for this company over the next few years.

Most investor attention in the graphics computing niche goes to Nvidia. But its key competitor, Advanced Micro Devices (AMD -2.32%), is also worth considering as a stock buy today.

In this video from "The Virtual Opportunities Show," recorded on Jan. 4, Fool contributor Jose Najarro discuss offers a few reasons why AMD is such a compelling investment option right now.

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Jose Najarro: I'm definitely talking about a semiconductor company and that would be AMD. But I want to push you a little bit more in to that digitalization work. Today, like Demitri mentioned, was, I think the first day of CES, the official first day of CES and AMD actually had a presentation. I feel sometimes investors, when they think about chip companies, they really focus too much on the enterprises and the datacenters and the big players. But the small players, the consumers, are still very important part of some of these chip companies.

Let me share my screen, for example. For example, Quarter 3, this most recent revenue for AMD was about $4.3 billion, that was up 54% year over year. Most of its revenue comes from the segment called computing and graphics segment, that made up $2.4 billion out of that $4.3. Over 50% of total revenues came from that segment. That segment is mainly the products for the consumer, so laptops, desktops, for example. It's nothing that deals with datacenter, with enterprises. There's a small segment that does, but it's almost non-existent. That shows the huge strength of the demand from consumers. There was a presentation, and if you guys want to watch it, feel free. AMD has it on their website already of a replay, and they've released a nice amount of products during the keynote. A lot of these solutions were solutions for the laptop market and for the desktop market. I believe that's because of this overall hybrid style. One of the biggest growth that they're seeing, let me stop sharing my screen, is in thin laptops that are high-performance, and I personally can understand why. For me as a content creator, I want a laptop that I'm able to edit video pretty quickly, but at the same time one that I'm not breaking my back carrying around locations with these hybrid workplace, I can go to wherever I want, but I don't need to gain drink a protein shake after I carry this laptop or carry it around. Lisa Su, the CEO, mentioned that this is the market they're seeing the biggest growth right now, the high-end laptops being lightweight. Again, we're seeing a lot of tech players, companies like Google, like Facebook working from home or doing this hybrid style, these are what the engineers, the developers, software coders, animators, people that need these high performance computing to grow. For me, a company that should definitely be in everyone's eye would be AMD. I do believe some of these valuations have jumped up like crazy, we can see it. I want to compare it to one of its competitor. Obviously, our competitor is Nvidia.

Full disclosure, I own both Nvidia and AMD. Nvidia is probably my favorite company, but when taking a look at valuations, I have to get emotions out of the picture. AMD, you can see in the past historically, this is a company that they used to track big wealth among each other. January 2021 happens, and even though NVIDIA, I believe has become more of a popular name among the semiconductor industry, you can see that divergence of their EV to EBITDA ratio, where to some extent, either Nvidia is either super overvalued, or AMD might be providing some form of opportunity. The other reason is we can see a AMD is focusing in a lot of big players in this overall digital transformation, gaming PC datacenters, and focusing in high-performance computing that are affecting everything from hyperscale, super-computing, 5G, artificial intelligence, automotive like we discuss. They recently hopefully going to finish their acquisition with Xilinx in Quarter 1 of 2022, which will increase their product solutions for autonomous driving to some extent and obviously gaming and smarter clients. This is definitely a company you keep an eye out in this digitalization of the workplace and also the consumer place.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Demitri Kalogeropoulos owns Meta Platforms, Inc. Jose Najarro owns Advanced Micro Devices, Alphabet (C shares), Meta Platforms, Inc., and Nvidia. The Motley Fool owns and recommends Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., and Nvidia. The Motley Fool recommends Xilinx. The Motley Fool has a disclosure policy.

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