We recently compiled a list of the Best Future Stocks For The Long-Term. In this article, we will look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks among the best future stocks for the long term.
A Soft Landing is More than Likely
The Fed plans to initiate rate cuts for the first time in over four years and investors do not know what to expect of the financial markets moving forward. On September 17, Stephen Juneau, Bank of America US economist, appeared in an interview on Yahoo Finance to discuss the impact of an unexpected growth in consumer spending on the economy.
Juneau reiterated that economic data is highly volatile and that the retail data released this morning will not impact the Fed’s rate cut decision tomorrow, and he expects the Fed to stick to a 25-basis point cut. As for consumer behavior, the economy is finally moving toward normalization and the consumer’s basket of goods reflects that. These indications, the increasing labor demand, and a stable investment outlook hint that a hard landing is highly unlikely.
The Outlook of Investing Amid Rate Cuts
On September 17, Eric Freedman, US Bank Asset Management Group CIO, appeared in an interview on Yahoo Finance to discuss the rate cut and how investors view investing. Freedman said that the rate cut depends on the Fed’s path, therefore an accurate prediction may not be possible at the moment.
Freedman talks about investment from an individual perspective, suggesting investors must move out of the front end of the yield curve. He then pointed to sectors that are currently providing value to investors, including the consumer discretionary sector, some parts of the energy sector, and tech, especially because investments in the sector are predicted to grow rapidly, well into 2025.
He then discussed what companies need to do to attract investors. Freedman emphasized the need for strong financials and suggested that companies should engage in buybacks or consider increasing dividends. The perfect combination of stocks, according to Freedman, includes companies that are returning cash and seeing strong organic growth.
The future of the economy and the financial market is quite unpredictable. However, some stocks can influence the market not just now, but also in the future. With that, let’s take a look at the best future stocks for the long term.
Our Methodology
To come up with the 10 best future stocks for the long term we looked up growth stocks in the AI, Cloud, Cybersecurity, Biotechnology, Electric Vehicle, and Renewable Energy industries. We then ranked the stocks with the highest number of hedge funds as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks fourth on our list of the best future stocks to buy for the long term. The company is responsible for manufacturing semiconductor devices that are used in computer processing. Some of its products include microprocessors, graphic processors, embedded processors, and motherboard chipsets.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is catching up to Nvidia to become a market leader in artificial intelligence. Such can be attributed to its strategic partnerships and acquisitions. In August alone, the company closed two acquisition deals. On August 12, the company completed the acquisition of Silo AI to speed up the development and deployment of AI models on AMD hardware. On August 19, AMD acquired ZT Systems, a provider of AI infrastructure, to accelerate its data center AI capabilities.
Advanced Micro Devices, Inc. (NASDAQ:AMD) logged $5.8 billion in revenue, during the second quarter of 2024, up by 9% year-over-year. Of this, its data center revenue accounted for $2.8 billion, up by 115%, making up almost 50% of total sales. During this quarter, the company also bagged significant companies as customers including Adobe, Boeing, Optiver, and Seimens.
The company expects to post strong financial results in the second half of 2024 as it delivers top-notch AI solutions to the market. In the third quarter of 2024, Advanced Micro Devices, Inc. (NASDAQ:AMD) expects revenue to reach $6.7 billion, representing a 16% growth rate from Q3 2023.
Analysts are bullish on AMD and their 12-month median price target of $190 points to a 26% upside from current levels. Overall, AMD was held by 108 hedge funds at the close of Q2 2024 with total stakes amounting to $10.3 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $3.8 billion.
Fred Alger Management mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a major global supplier of PC microprocessors and graphics processors to computing original equipment manufacturers (OEMs). The company’s product range spans desktops, notebooks, servers, graphics, and embedded/semi-custom chips. AMD operates in a large addressable market, covering areas such as PCs, servers, high-end gaming, and deep learning. Additionally, AMD has introduced competitive AI technologies, including powerful accelerators poised to capture a share in a market worth several hundred billion dollars. During the quarter, the company reported fiscal first-quarter operating results that met analyst estimates, with strengths in data center GPUs and server CPUs offsetting weaknesses in their gaming and embedded businesses. Moreover, management raised their fiscal second-quarter revenue guidance, albeit slightly below consensus estimates, where they expected double digit growth in data center revenues, while projecting a decline in their gaming segment, driven by weaknesses in both desktop GPUs and Semi-Custom Systems-on-a-Chip (SoC). While weaker-than-expected near-term results weighed on shares during the quarter, we believe the company is positioning itself to potentially benefit from long-term growth in AI infrastructure spending. Specifically, the company continues to gain server CPU market share, which could potentially accelerate as traditional compute deployments begin to recover.”
Overall, AMD ranks 4th on our list of the best future stocks for the long-term. While we acknowledge the potential of AMD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article was originally published on Insider Monkey.