Shares of Advanced Micro Devices (AMD +4.32%) have soared following a major deal it recently signed to supply an enormous amount of chips to ChatGPT maker OpenAI. While the stock may need to cool off before it can run higher, there are great reasons to believe AMD stock can deliver excellent long-term gains for investors.
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Why buy AMD stock?
Top hyperscalers like Alphabet's Google and Microsoft launched over 160 new cloud services using AMD's chips last quarter. The number of AMD-powered cloud instances has increased nearly 50% year over year, which shows AMD becoming a key supplier of chips for artificial intelligence (AI) workloads.
NASDAQ: AMD
Key Data Points
AMD is on schedule to launch its next-generation Venice server processors next year. It will also begin supplying the first batch of Instinct MI450 graphics processing units (GPUs) to OpenAI. Analysts expect AMD's revenue to grow 31% in 2025 before increasing another 30% in 2026.
During an October conference call with analysts, CEO Lisa Su said, "We are in the very early stages of the largest deployment of compute capacity in history." Analysts are expecting its earnings to grow at an annualized rate of nearly 40% over the next several years.
I believe AMD is in a solid position for growth over the long term and could significantly outperform the broader stock market over the next decade.
