The ultimate growth stock to buy for $10,000 right now

Advanced microdevices (AMD -0.27%) It didn’t seem to be falling out of favor with Wall Street in the first half of 2024, with its stock down 8% year-to-date. For reference, rival chip Nvidiahis stock is up 113% over the same period. Middling gains suggested AMD has yet to make significant progress in artificial intelligence (AI), and a general pullback in tech stocks fueled the declines.

However, AMD posted its second-quarter 2024 earnings on July 30, which finally saw the chipmaker win in the budding industry. The company’s AI-focused data center segment saw record growth for the period, along with sales growth in its central processing unit (CPU) division.

As a result, AMD stock is an increasingly attractive investment. The company boasts a long history of growth, with its stock up nearly 5,000% over the past decade. Meanwhile, revenue and operating income rose 312% and 169%, respectively. AMD is just getting started in AI and could see major gains as it expands in the coming years.

So here is the best growth stock to buy with $10,000 right now.

AMD might have more room to run than Nvidia

AMD and Nvidia are often compared; both are top contenders in the chip market. These companies collectively represent almost the entire graphics processing unit (GPU) sector and have similar dominance in AI GPUs. However, their businesses are at very different stages of development, illustrated by AMD’s market cap at $221 billion and Nvidia’s at $2.6 trillion today.

The difference could indicate massive growth potential for AMD as it continues to make strides in artificial intelligence, an industry worth $197 billion in 2023 and expected to reach just under $2 trillion by the end of the decade . The AI ​​market is expanding at a compound annual growth rate of 37%, suggesting that there is plenty of room for Nvidia to maintain its dominant market share and for AMD to carve out a profitable role.

Recent earnings show that AMD is doing just that. In Q2 2024, the company’s data center segment posted 115% year-over-year gains. Meanwhile, operating income rose 405% to $743 million. Total revenue for the quarter rose 9% despite a 59% drop in gaming revenue. The numbers represent a positive turnaround in AMD’s business as its consistent investment in AI offsets losses in other divisions.

Game potential

Before interest in AI skyrocketed last year, AMD was primarily known for its role in gaming. For years, the company has enjoyed significant success selling its GPUs and processors directly to consumers who use these chips to build high-performance gaming PCs or powerful video editing setups.

The company continues to benefit from this sector thanks to increased processor sales, evidenced by a 49% year-over-year increase in its customer segment. However, its gaming division, which includes GPU revenue and semi-custom chip sales, has been on a downward trend. The company argued that the declines were mainly due to lower semi-custom revenue.

Some of AMD’s largest semi-custom customers include Sony and Microsoftwhich use these chips to power gaming consoles such as the PlayStation 5 and Xbox Series X|S. Sales for these consoles are often cyclical, starting strong and mostly declining until the next generation. Both consoles were released in 2020, which could explain lower chip sales for AMD.

However, a refresh of the mid-gen console could be just around the corner, with Sony working on a PlayStation 5 Pro and Microsoft likely to follow suit. The new consoles would likely boost sales of AMD’s semi-custom chips and its gaming segment. With the positive growth in AI and CPUs, AMD has become a well-rounded business that might be worth investing in.

AMD stock is a better value than you might think

AMD has struggled to win investor support for much of this year as it worked to catch up in AI. Heavy investments in generative technology and average earnings have made its stock too expensive to consider. However, recent quarterly results have improved its value.

Data by YCharts

This chart shows that AMD’s price-to-earnings (P/E) and price-to-sales (P/S) ratios are below the company’s 12-month averages for both metrics. The numbers suggest that AMD stock is trading at one of its best values ​​in months.

With massive potential in AI and encouraging earnings, AMD is an attractive stock to buy at $10,000 and hold for the long term.