Forget AMD in 2024: 2 AI Stocks to Buy Instead

Shares in Advanced Micro Devices (NASDAQ: AMD) are up more than 130% year over year, fueled by a stellar growth year for artificial intelligence (AI). The launch of OpenAI's ChatGPT in November 2022 sent countless chip stocks soaring as Wall Street grew bullish over the companies developing the hardware necessary to run and train AI models.

With the second-largest market share in graphics processing units (GPUs) and plans to begin shipping a new AI chip this year, AMD has significant potential in the industry over the long term. However, just because a company has a leading position in an industry doesn't necessarily mean it's trading at the right price.

AMD's earnings have yet to reflect its heavy investment in the market, which has seen its forward price-to-earnings ratio (P/E) rise 58% since last January to a pricey 45. Meanwhile, its free cash flow has plunged 47% to just over $1 billion in the same period. As a result, shares in AMD are potentially riskier than AI stocks trading at a better value or in better financial standing.

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Source Fool.com