Shares of Advanced Micro Devices (AMD 0.80%) have pulled a stunning round trip so far in 2024. Following management's increasingly upbeat commentary on sales related to artificial intelligence (AI) early in the year, the stock soared higher.

But then reality started to settle in after the first-quarter update, and shares are now down about 30% from those peaks, reached early in the spring.

If you've been following along, there's always been a clear-cut reason to be optimistic about AMD -- and a clear-cut reason to be skeptical. Is it time to buy the stock dip?

AI is gonna be huge -- what happened?

Entering 2024, CEO Lisa Su and her team were getting increasingly optimistic about AI chip sales. Su has stated an expectation for $2 billion in accelerated-computing sales (accelerated computing being the real trend behind the scenes, not simply AI). But then in January, the outlook was raised to $3.5 billion.

For a company that had $22.8 billion in sales in the last reported 12-month stretch, AI chips thus represent a significant -- but not massive -- new market. The new MI300 accelerated-computing system is reportedly AMD's fastest product to ramp up to $1 billion in revenue, reaching that status in just two quarters.

Suffice to say investors were excited.

But the reality check? Despite the glowing reviews of AMD AI, that $3.5 billion outlook for 2024 AI sales wasn't raised again during the first-quarter update.

And the guidance for the second quarter was also a bit lackluster. At the midpoint of guidance, the expectation for the quarter is for revenue of $5.7 billion, up 4% from the prior quarter and just 6% from the previous year -- when AMD results were still down in the dumps from the bear market.

Hopes are (rightfully) diminishing that AMD data-center AI revenue can go parabolic like Nvidia's has.

AMD Revenue (TTM) Chart

Data by YCharts.; TTM = trailing 12 months.

AMD's focus can't be the same as Nvidia's

As I've written numerous times since the completed acquisition of Xilinx in early 2022, the most important reason AMD could continue to be a winning semiconductor stock is rising profit margins.

This was the reason I was skeptical about AMD stock rallying aggressively in recent months. Hidden behind all of management's AI talk the last few quarters was a more somber message about needing to get profit margins back on track.

Indeed, the bear market did a number on AMD -- especially with cratering consumer spending on PCs and laptops (its client revenue segment). The segment's operating profit was $86 million in the first quarter, for a margin of only 6%. There's tremendous room for improvement as consumer PC spending stabilizes this year.

Data center AI chips aren't quite providing the massive offset to weakness in other parts of the business, like embedded (Xilinx) and gaming (video game consoles). But what AMD's data center lacks in revenue-growth sizzle, it does make up for in profit-margin expansion. Operating margins were 23% in the first quarter, versus a meager 11% the year prior.

AMD Operating Margin (TTM) Chart

Data by YCharts.

AMD still has a way to go until it returns to anywhere near its last peak level of profitability in 2022. But if it gets back on a positive trajectory, shares could still be a reasonable deal at 46 times, though maybe not a particularly amazing value.

Let's just pretend like the new all-time highs in the stock this spring never happened at all, rather than call this a dip. I'm a shareholder, patiently waiting to see how this story pans out, but I'm not buying at this time.