The tech market is brimming with attractive growth stocks thanks to the consistently developing nature of the industry. Many of the sector's leading companies provided investors with substantial gains over the past five and 10 years. However, it's not too late to invest in the booming market. As the proverb goes, "The best time to plant a tree was 20 years ago. The second best time is now." The same is true of investing in growth stocks.
Advanced Micro Devices (AMD 4.94%) has seen its stock rise 824% in the last five years, and more than 3,000% in the last decade. The company's swift rise came alongside a growing dominance in consumer PC components. However, expansions into data centers and custom chips have strengthened AMD's future earnings and outlook.
Here's why AMD is my top growth stock to buy right now.
AMD has stellar prospects in multiple areas of tech
AMD carved out its leading position in tech by producing top-performing computing hardware for the consumer market with its central processing units (CPUs) and graphics processing units (GPUs). In fact, its success in CPUs led the company to consistently steal market share from Intel over the years, with AMD's share growing from 18.1% in the first quarter of 2017 to 35.2% in Q4 2022. Meanwhile, Intel's has fallen from 81.9% to 62.8%. However, a market downturn last year forced AMD to pivot toward less consumer-reliant segments.
Amid macroeconomic headwinds, the tech giant proved its resilience by reporting revenue growth of 44% in fiscal 2022. The increase was primarily driven by its expansion into data centers and embedded products, which have further diversified its business and fortified earnings against short-term hurdles.
Regarding data centers, AMD's server chips power online platforms worldwide, with some of its clients including cloud leaders like Microsoft's Azure, Alphabet's Google Cloud, and Oracle. Additionally, a current boom in artificial intelligence (AI) has the potential to increase demand for AMD's chips in the coming years as more businesses turn to cloud services to improve efficiency.
Moreover, AMD's embedded segment saw a massive boost in the last year, thanks to the acquisition of Xilinx in 2022. The company develops CPUs for specialized tasks such as automotive, industrial, aerospace and defense, space, and AI. The purchase vastly widened AMD's position in tech, making it one of the most varied growth stocks available.
Inflation eased for the ninth month in a row in March, with prices rising 5% after hitting a high of 9.1% in June 2022. As it continues to improve, AMD's consumer PC business could gradually recover, making the company home to strong positions in PC gaming, data centers, and embedded products.
A bargain compared to the competition
Alongside solid positions in different areas of tech, AMD's current stock price is a bargain next to its peers. The company's forward price/earnings-to-growth ratio (PEG) is preferable to those of tech giants Alphabet, Apple, and Microsoft, as seen in the table below.
Data by YCharts
PEG is a helpful indicator of a stock's value, as it factors in future earnings growth. A PEG less than one is considered the best, as it suggests a company is undervalued, with its current price not accounting for an expected rise in earnings. However, a negative PEG forecasts a decline in earnings. As a result, AMD is right in the sweet spot, being undervalued despite its stock being up 41% year to date.
Furthermore, the semiconductor company's biggest competitor, Nvidia, currently has a PEG of 0.37, with AMD's stock still the bigger bargain.
As markets like AI, cloud computing, virtual reality, gaming, and more continue to advance, so will the demand for powerful chips. AMD is in a prime position to profit from the development of a wide variety of tech industries, making it by far my top growth stock to buy right now.
