Artificial intelligence (AI) technology took off in a big way last year. This generated explosive demand for the high-performance semiconductor chips produced by Advanced Micro Devices (AMD 1.78%).

As a result, AMD shares more than doubled from a 52-week low of $81.02 reached last May to a high of $227.30 in March. Since then, AMD's stock price has dipped along with the broader stock market.

Does this share price decline create a buy opportunity despite AMD's amazing stock climb? To answer that question, a closer examination of AMD is necessary.

AMD's mixed demand environment

AMD's AI chips proved a boon for the company's division focused on data center products. This is understandable because AI systems require tons of data and computing power, both of which reside in these cloud computing locations.

As a result, fourth-quarter revenue in AMD's data center segment rose an impressive 38% year over year to $2.3 billion. AMD's management team anticipates this segment's sales will continue to grow in 2024. However, all is not rosy for the chipmaker.

AMD exited 2023 with $22.7 billion in revenue, down 4% compared to 2022's $23.6 billion. Why did AMD suffer a modest year-over-year revenue decline despite the red-hot AI market?

Historically, AMD depends on two business segments to generate the majority of its revenue. These are its PC and video games divisions.

These two segments produced $13 billion of AMD's $23.6 billion in 2022 sales. Yet in 2023, these divisions accounted for $10.9 billion in revenue, contributing less than half of AMD's $22.7 billion.

This decrease is part of the cyclical nature of the semiconductor industry. In fact, the video game industry's currently tepid demand for chips means AMD's gaming segment is expected to remain depressed in 2024. Management anticipates revenue for the division will decline by double digits compared to 2023.

Adding to this, the company forecasts its embedded segment, which encompasses AMD's products for commercial and industrial applications, will see a revenue decline in 2024 as well. This is due to surplus product inventory among customers.

The embedded division is a new business for AMD, which it entered after acquiring Xilinx in 2022. Last year, AMD's embedded segment generated $5.3 billion in revenue.

What lies ahead for AMD

It's not all doom and gloom for AMD. The company's PC business is set to rebound in 2024. This is driven by the inclusion of AI-enabled chips in the latest lineup of consumer devices, such as laptops, preparing to hit the market.

In the short term, the predicted drop in its gaming and embedded businesses means AMD's Q1 revenue is estimated to come in around $5.4 billion. This is flat compared to the prior year.

Despite the lackluster results expected for Q1, over the long run, AMD anticipates the growth in artificial intelligence technologies will eventually encompass all areas of its business.

According to CEO Lisa Su on the Q4 earnings call, "Taking a step back, we believe AI is a once-in-a-generation transition that will reshape virtually every portion of the computing market, starting in the data center and then expanding into PCs and across multiple embedded markets."

AI is certainly a transformative technology that's still in its early years. Forecasts estimate the global AI market will be $184 billion in 2024, rapidly expanding in the next few years to hit $827 billion by 2030.

To buy or not to buy AMD stock

The AI market's growth serves as a multiyear revenue tailwind for AMD, further helped when the company's gaming business eventually recovers. In addition, management estimates its embedded business will bounce back in the latter half of this year.

In light of these developments, AMD is positioned to achieve revenue growth over time, making its stock a good long-term investment.

Adding to this, the current consensus among Wall Street analysts is an overweight rating for AMD stock with a median share price of $195. This indicates a belief in upside for shares.

But given the mixed results of AMD's business in 2023, management's muted Q1 forecast, and the stock's run-up over recent months, some caution is warranted, depending on your risk tolerance.

In this case, a good strategy is to use dollar-cost averaging to buy shares. Take a small position in AMD stock, and consistently add to it over time. The occasional price dip hurts less with this approach since you end up with more shares at a lower cost.