Semiconductor Stock Rides AI Wave to Blockbuster Gains

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Operational Overview and Recent Earnings

Semiconductors drive computing power for PCs, servers, and AI workloads, with AMD’s portfolio spanning client CPUs (40% of revenue), data center CPUs and GPUs (35%), gaming chips (15%), and embedded FPGAs (10%). 

In Q1 2025, revenue surged 36% year-over-year to $6.8 billion, exceeding guidance, per a May 7, 2025, update. Client revenue soared 68% to $1.4 billion, fueled by premium Ryzen CPUs, while data center revenue grew 57% to $2.3 billion, driven by EPYC server CPUs and MI300 AI GPUs. Non-GAAP EPS held at $0.62, tempered by an $800 million AI chip write-off for China. 

Q2 guidance projects 27% growth to $7.4 billion, above consensus.

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The Big News: Nvidia’s Earnings Blowout Positions AMD for Sector-Wide Strength

Nvidia’s fiscal Q1 2026 (ended April 2025) delivered $44.1 billion in revenue, up 69% year-over-year, with Q2 guidance of $45 billion (50% growth), per yesterday’s earnings report. 

Despite a $4.5 billion inventory write-off and $8 billion in foregone China revenue due to U.S. export controls, Nvidia’s 73% data center growth ($39.1 billion, 70% from Blackwell GPUs) and 42% gaming surge signal robust AI and compute demand. 

This benefits AMD peripherally by validating the $500 billion AI accelerator market (25% CAGR through 2028), where AMD’s MI300 GPUs compete. Nvidia’s Blackwell ramp, absorbing supply chain capacity, creates opportunities for AMD’s $6.5 billion AI GPU revenue in 2025 (up from $5 billion in 2024). 

Oracle’s (NYSE: ORCL) AI cluster deal with AMD and Middle Eastern partnerships (e.g., UAE’s G42) leverage Nvidia’s ecosystem, boosting AMD’s inference market share by 5-10% by 2027.

Strategic Positioning and Competitive Edge

A commanding presence in the $600 billion semiconductor market stems from AMD’s x86 license and TSMC partnership (NYSE: TSM), enabling 20% CPU share gains from Intel since 2020. 

The $50 billion Xilinx acquisition (2022) and pending ZT Systems deal bolster FPGA and AI infrastructure, targeting a $500 billion AI accelerator market by 2028. A $2 billion R&D budget drives chiplet designs, enhancing MI300 GPU yields, while partnerships with Oracle and G42 tap AI demand. 

A 15% revenue CAGR forecast through 2029, outpacing the 10% industry average, is fueled by server CPUs (18% CAGR) and AI GPUs (25% CAGR), positioning AMD as a second-source AI leader.

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*This free resource is being sent by Zacks. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service".

Bear Case

• U.S.-China export controls could slash $700 million in Q2 AI GPU revenue, with Huawei eroding 5% of AMD’s China share. 

• Intel’s manufacturing recovery may reclaim 10% of CPU share by 2026. 

• ARM’s (NASDAQ: ARM) rise in PCs and servers risks 3-5% of x86 demand. 

• Nvidia’s CUDA dominance could limit AMD’s AI GPU share to 10%. 

• Cyclical PC downturns may cut client revenue by 10-15%.

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That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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