Advanced Micro Devices (AMD 0.69%) stock dropped more than 8% on Thursday, March 31, following a downgrade by Barclays analyst Blayne Curtis, who believes that the chipmaker could be headed for a cyclical slowdown in 2023.

Curtis lowered his rating on AMD stock to "equal weight" from "overweight" and slashed the price target to $115 from $148. That's despite the analyst's estimate that the company could grow at a faster-than-expected pace this year thanks to market share gains in the client and server CPU (central processing unit) markets.

However, Barclays fears that the company's growth in 2023 is at risk on account of a potential slowdown in gaming, personal computing, and other markets where its chips are used. But Barclays' downgrade has opened an opportunity for savvy investors to buy shares of AMD, as the chipmaker's growth momentum could continue in 2023 and beyond.

AMD's terrific growth is sustainable in the long run

AMD expects to clock 31% revenue growth in 2022 to $21.5 billion. The company's non-GAAP gross margin is expected to increase three percentage points this year to 51%, which should translate into robust bottom-line growth. Analysts are anticipating $4.04 per share in earnings from AMD this year, which would be an increase of 45% over last year.

Barclays believes that AMD could exceed its growth target in 2022, which won't be surprising due to the tailwinds in the data center, gaming, and PC markets. More importantly, the markets AMD operates in are built for long-term growth.

For instance, the demand for CPUs and GPUs (graphics processing units) used in data centers is set to increase rapidly in the long run. According to a third-party estimate, the data center accelerator market is set to grow to a size of $53 billion by 2027 as compared to $4.2 billion in 2020. GPU deployments in the data center could grow at a compound annual rate of 42%, while CPU deployments are expected to hit nearly 44% growth.

Person holding a smartphone and thinking.

Image source: Getty Images.

This isn't surprising. The growth of artificial intelligence (AI) and machine learning workloads, as well as emerging tech trends such as the metaverse, will create the need for more computing power in data centers. AMD is already benefiting from this lucrative market, as its data center revenue more than doubled in 2021. The company's GPUs and CPUs have been selected by multiple supercomputer operators, including Meta Platforms' AI supercomputer that's using AMD's EPYC chips to power the metaverse.

AMD management pointed out on the February earnings conference call that the data center business accounts for nearly a quarter of its total revenue. So, the bright prospects of this segment should move the needle substantially for AMD and help it sustain its long-term growth.

Meanwhile, AMD is in a nice position to tap the growing demand for gaming hardware. The company supplies graphics cards and CPUs that are used in PCs and semi-custom chips that are used in gaming consoles, and the good part is that all these markets are expected to grow at a nice pace.

Sales of PC gaming hardware, for instance, could clock 20% annual growth through 2025 as per Jon Peddie Research, which should lift sales of AMD's CPUs and GPUs. The chipmaker controlled 19% of the discrete GPU market at the end of last year, while its share in desktop and laptop CPUs stood at 16.2% and 21.6%, respectively.

On the other hand, the new generation of gaming consoles from Sony and Microsoft are currently in the early stages of their sales cycle and are expected to sell in huge numbers in the coming years. What's more, AMD has diversified its presence in the gaming console market with Valve's Steam Deck, a device that could substantially add to the chipmaker's semi-custom sales.

As such, AMD has multiple growth drivers that should help it maintain its outstanding growth in the long run. Not surprisingly, analysts expect the company's earnings to grow at a compound rate of 30% for the next five years, which is why investors shouldn't miss the latest opportunity to buy AMD stock.

The valuation makes the stock a solid buy right now

AMD's pullback has brought the stock's price-to-earnings ratio down to 43. It was trading at nearly 48 times earnings before the crash, which means that savvy investors can scoop up the stock at a relatively attractive level right now.

Chart showing rise and fall in AMD's PE ratio in March 2022.

AMD PE Ratio data by YCharts

The sales multiple of eight is also lower than last year's average of roughly 12. So, investors are getting a good deal on AMD right now -- which they should consider grabbing with both hands given its potential to deliver robust long-term earnings growth on account of the fast-growing end-markets it is serving.