As a leader in computing components, Advanced Micro Devices (AMD -0.35%) is a company building the future with lucrative prospects in a variety of industries that all require its hardware to move forward.
AMD's stock plummeted 55% in 2022 amid economic challenges. However, the company's shares have steadily risen 26% since Jan. 1, as tech stocks have come back into favor with investors and the release of promising quarter results.
With its stock showing signs of recovery, now is an excellent time to learn more about this company of the future. Here are three things about AMD that smart investors know.
1. AMD is a better investment than Nvidia
AMD's biggest competitor and the company it is most often compared to is Nvidia. Both companies compete in the consumer graphics processing unit (GPU) market, with their stocks similarly plunging over 50% in 2022 amid declines in PC component spending.
However, there are a few reasons AMD is the better investment. Last year was difficult for all companies in the PC market, with worldwide shipments of GPUs falling 42% throughout 2022. AMD fared better, though, with its 8% market share in consumer GPUs, compared to Nvidia's 88%. As a result, in fiscal 2022, AMD's revenue rose 43.6% year over year to $23.6 billion, while Nvidia's increased 0.2% to $26.97 billion.
AMD's better distribution of revenue meant that while its PC-centered segments suffered last year, it could pivot its business to more lucrative segments like data centers and embedded products. Combined, these segments reported revenue growth of 169% year over year to $10.5 billion in 2022. AMD has similar prospects to Nvidia in high-growth markets like artificial intelligence (AI) and data centers but feels like a stronger and more reliable business thanks to its diversity.
2. AMD is a leading name in virtual reality
According to Grand View Research, the virtual reality (VR) market was worth $21.83 billion in 2021 and is projected to expand at a compound annual growth rate (CAGR) of 15% through 2030. Meanwhile, AMD holds a dominating position in the industry as the producer of the hardware necessary to run and develop VR software. In fact, AMD has already partnered with Microsoft's Windows Mixed Reality, HTC's Vive, and Meta Platform's Oculus to power their respective VR headsets.
Moreover, tech giant Apple is expected to launch its first-ever mixed-reality headset in 2023, potentially boosting the market substantially. The iPhone company has a history of entering new markets with its products and rapidly speeding up the mass adoption of technology. Apple achieved this when launching its take on smartphones, tablets, Bluetooth headphones, and smartwatches.
As a result, AMD could significantly benefit from Apple's venture into VR, as it would encourage more competition and drum up more business for the chipmaker.
3. It has a lucrative future in artificial intelligence
AI has been a hot topic in tech in recent months after start-up OpenAI launched its advanced chatbot, ChatGPT, in November 2022. The program's ability to produce human-like dialogue wowed the tech world and shined a light on an industry valued by Grand View Research at $136.55 billion in 2022 and expected to grow at a CAGR of 37.3% through 2030.
Similar to VR, AMD is an excellent way to invest in the hardware side of the AI market. The company's GPUs and processors have the power to run and develop AI software, making its offerings incredibly attractive to companies like Microsoft, Amazon, and Alphabet, which are currently in a race to be crowned the king of artificial intelligence.
AI has the potential to enhance countless industries, from machine learning to healthcare, self-driving cars, education, and more. AMD CEO Lisa Su revealed in the company's fourth quarter of 2022 earnings call, "You can expect additional AI acceleration coming in our server portfolio ... So you're going to see AI broadly across our road maps."
It's positive AMD has an eye on the high-growth industry, strengthening its long-term outlook.
