Is the US stock AMD (AMD.US) seriously undervalued? Is it worth buying at the current price?

14%NVIDIA Corporation NVIDIA CorporationAIARMAMDAI AMDNVIDIA CorporationAMDNVIDIA CorporationThe proportion is as high as 25%, significantly exceeding NVIDIA Corporation's 10%, but the absolute difference in amount limits its catching-up speed.The huge investment in research and development by NVIDIA Corporation provides guarantee for its technological leadership in AI chips and high-performance computing. Although AMD invests a higher percentage in research and development, its technological progress is difficult to compete with NVIDIA Corporation in certain areas due to insufficient total amount. This gap in financial strength has become an obstacle for AMD to overcome in the short term. Let's take a look at the AI chip market again, especially in the training and inference stages. In the AI training stage, NVIDIA Corporation's H100 chip is widely used, but it is also very expensive, costing about $8 million. If AMD's MI300A chip is used, the cost would be reduced to $6.4 million. Although AMD has a higher cost-performance ratio in the AI training stage, its technological update speed is relatively slow, so even though its chips have advantages in some areas, NVIDIA Corporation's new products always manage to surpass them. However, the situation is different in the AI inference stage, as AMD's chips are more competitive in terms of cost and efficiency compared to NVIDIA Corporation. Nevertheless, in the AI chip market, the most cost-effective choice is still Alphabet Inc. Class C's TPU chip, which costs only 30% of AMD and NVIDIA Corporation. Therefore, although AMD's chips have advantages in some areas, they still face competition from other more cost-effective competitors in the overall market. So, can AMD gain a larger share in the AI chip market in the future? Looking at historical performance, the growth rates of both companies in the data center field are similar, indicating that although AMD's market size is smaller, its growth is consistent with the overall market development, without falling far behind. How can AMD expand its market share? Firstly, the undersupply in the AI chip market has become an important entry point for AMD. Although NVIDIA Corporation is technologically superior, the high demand for products like the B series chips has exceeded its production capacity, leading many customers to be unable to obtain supply in a timely manner. In this situation, AMD enters the market with higher cost-performance ratio, quickly filling the demand gap that NVIDIA Corporation cannot cover. For large cloud computing and internet companies trying to reduce supply chain risks, AMD's products become a reasonable alternative. These enterprises not only hope to alleviate their over-reliance on NVIDIA Corporation but also need to ensure supply chain security by having multiple suppliers, and AMD is gradually becoming a key part of this strategy. At the same time, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, as the only global contract factory capable of producing the most advanced AI chips, also provides potential strategic support for AMD. Although NVIDIA Corporation currently occupies most of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's capacity, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR may tend to support more customers for risk diversification purposes. For AMD, this is both an opportunity and a challenge. If it can catch up on technology and demonstrate strong market demand, AMD may be able to gain more capacity support, accelerating its rise in the high-end market. However, to truly shake off the label of being the "second choice," AMD needs to make efforts in several areas. Firstly, continuous increase in research and development investment is inevitable. Although AMD's research and development ratio is as high as 25% of its revenue, the absolute amount is still far lower than NVIDIA Corporation, limiting its speed of technological innovation. Secondly, ecosystem building needs to be strengthened. NVIDIA Corporation's CUDA ecosystem has become an industry benchmark, and AMD needs to lower the switching threshold through tool chains, developer support, and wide compatibility to attract more customers to use its platform. Most importantly, AMD needs to consolidate its position by leveraging the dynamic changes in the current market. The rapid growth of the AI chip market provides a rare upward channel for AMD. By offering more flexible pricing, timely delivery, and continuous technological optimization, AMD can not only further expand its market share but also gradually break free from the limitations of being an "alternative" to become a more important player in the market landscape. AMD's Ace: Strategic Acquisitions To accelerate technological progress, AMD has rapidly strengthened its capabilities through a series of strategic acquisitions, especially in the field of AI chips. These acquisitions not only help AMD fill technological gaps but also provide powerful weapons in its competition. Initially, AMD primarily focused on CPU development and was an important processor supplier in the PC market. With technological advancements, especially the increase in demand in the graphics processing field, AMD realized that it must expand its product line to maintain competitiveness. In 2006, AMD acquired ATI, laying the foundation for its GPU (Graphics Processing Unit) technology. ATI was a company specializing in graphics card technology, and after the acquisition, AMD not only strengthened its position in the GPU market but also could provide comprehensive graphics solutions, forming the ability to directly compete with NVIDIA Corporation. However, with the rise of AI chips, AMD gradually realized that relying solely on hardware, especially in graphics processing, was not sufficient to meet the growing market demands, especially in AI applications. Therefore, AMD began to diversify its technology areas through strategic acquisitions. In 2020, AMD acquired Xilinx, marking its foray into more diversified technology fields.The company is officially entering the AI hardware field.Xilinx is well-known for its programmable logic devices (FPGAs), which allow chips to be flexibly adjusted after deployment, greatly enhancing computing power in areas such as AI, autonomous driving, and data centers. Through this acquisition, AMD has taken a significant step forward in hardware and paved the way for future development of full-stack AI solutions. Unlike traditional fixed-function chips, Xilinx's technology makes AI software development more flexible, able to quickly adapt to the needs of different application scenarios, fundamentally changing the design of AI hardware. However, hardware is only a part of AI technology, software is the key to maximizing efficiency. Therefore, in 2023, AMD acquired the open-source software company Nod AI, marking AMD's strategic transformation from a hardware manufacturer to a provider of full-stack AI solutions. This acquisition brought powerful AI software capabilities to AMD, enabling it to deeply integrate hardware and software and provide a more comprehensive range of AI products to meet the full chain of needs from hardware to software. AMD's goal is not only to provide AI chips, but also to provide comprehensive software support for AI development, allowing AMD to establish a presence in the competitive field of AI technology. AMD's acquisition strategy is not blind expansion, but precise selection of companies that are highly aligned with its own strategies, focusing on filling technology gaps and enhancing core capabilities. For example, acquisitions of companies like Beyond Limits and Lambda, which focus on industrial-grade cognitive AI and deep learning infrastructure, provide the technological support that AMD needs. Through a series of precise acquisitions, AMD not only fills technological gaps, but also lays the foundation for the future development of the AI industry. Although AMD entered the AI field relatively late, with these key acquisitions, AMD has gradually gained momentum and may even surpass NVIDIA Corporation in some areas. Especially in the deep integration of AI hardware and software, AMD's full-stack solution undoubtedly gives it a stronger competitive advantage in future market competition. Leadership plays a crucial role in this competition. AMD's current CEO, Su Zurong, has revitalized AMD and under her leadership, AMD not only broke Intel Corporation's monopoly in the CPU market, but also narrowed the gap with NVIDIA Corporation. With her unique strategic vision and decisive decision-making, Su Zurong has shown AMD's stronger competitiveness when facing the strong enemy of NVIDIA Corporation. Her precise layout in research and development investment and cost-effectiveness has accumulated strong growth potential for AMD and market confidence in AMD's future development. Overall, the fundamental analysis above provides a reliable inference and prediction of AMD's future development, but whether it will be realized is still unknown. The stock investment website believes that the fundamentals cannot support the conclusion that AMD is a good buy. However, from a technical perspective, AMD has fallen to a strong support level near $119 in November 2023, which may form a double bottom, presenting a good short-term buying opportunity. At least before AMD's financial report on February 4, there should be a good rebound. This article is reprinted from the "US Stock Investment Network" public account, edited by GMTEight: Jiang Yuanhua.