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Investing in semiconductor stocks has generally been a good move for investors of late. In the past three years, the VanEck Semiconductor ETF has risen by just around 80%, which is a far more impressive performance than the S&P 500 and its 38% gains over that time frame.
One chipmaker that has been an underwhelming investment, however, is Advanced Micro Devices (NASDAQ: AMD), also known as AMD. While the market has been rallying and chip stocks have been hot buys, AMD stock is down around 10% over the past three years. Its lackluster growth simply hasn't given investors a reason to be too excited with its results and future prospects.
But if its CEO is correct and the company is on the cusp of some significant growth, buying the tech stock today could result in some fantastic returns for investors in the not-too-distant future.
AMD expects strong growth in the years ahead
A quick look at AMD's growth rate in recent quarters leaves little wonder as to why the stock hasn't been taking off. While sales have been picking up of late, the trend hasn't always been a strong one for the chipmaker.
While other companies involved with artificial intelligence (AI) have been experiencing strong sales growth, it hasn't been a smooth ride for AMD, to say the least. Its growth rate did, however, accelerate to 24% during the last three months of 2024, and it forecasts that for the current quarter, its year-over-year growth rate will rise again to 30%.
The company does appear to be on the right track, and CEO Lisa Su believes that even more growth is on the horizon for the business and that it's "on a steep long-term growth trajectory, led by the rapid scaling of our data center AI franchise from more than $5 billion of revenue in 2024 to tens of billions of dollars of annual revenue over the coming years."
If AMD generates "tens of billions" in revenue, that would mean a sharp acceleration in its growth, as this past year, its top line rose by 14% to $25.8 billion. If Su's projection turns out to be true, that implies that AMD may double its revenue. And if that happens, that could surely be the catalyst the stock needs to get going. While sales have been rising for AMD, the growth rate hasn't been all that explosive for the business thus far.
There are still some important question marks
Su's forecast sounds promising, but investors should be careful not to set their expectations too high. After all, there are concerns that economic conditions may slow, especially with the potential for tariffs and trade wars to weigh on many businesses.