According to Redditors, is Advanced Micro Devices Inc. (AMD) a good stock to buy now?

We recently compiled a list of the The 10 Best Reddit Stocks to Buy Now. In this article, we'll take a look at where Advanced Micro Devices Inc. (NASDAQ:AMD) stands compared to the other stocks to buy according to Redditors.

In the current financial climate, maintaining balance is crucial as uncertainty looms in both the stock and bond markets. Investors are advised to stay abreast of these changes and look for potential opportunities. Recently, discussions have focused on the performance of mega-cap stocks, particularly in a bull market that has seen significant gains. As this bull market approaches its second anniversary, there is optimism about the future of AI and its impact on stock performance. Key market players are expected to continue driving growth, although perhaps at a slower pace than in previous years.

Looking forward, investors should prepare for a more gradual approach to rate cuts and reassess historical expectations regarding market dynamics. The ongoing economic changes require a diversified investment strategy with a focus on long-term growth potential, especially for new entrants. Focusing on stocks with solid fundamentals and cash reserves can provide safer options in an evolving environment. In early October, Malcolm Ethridge, managing partner of Capital Area Planning Group, appeared on CNBC to talk markets and specifically mega-cap stocks. We discussed his opinion in more detail in our article about it The 8 best stocks to buy now for beginnershere is an excerpt from it:

“When discussing the resilience of the two-year bull market, Ethridge emphasized that rising interest rates would initially have a negative impact on market performance. But despite historically high interest rates, the market thrived. He noted that many leading companies, including some of the MAG7, have significant cash reserves and do not rely on debt to finance their growth. This financial power allows them to invest in AI technologies without having to worry too much about Federal Reserve policies…

ALSO READ: 10 Best Pharma Stocks to Buy Now and 10 AI News Investors Shouldn't Miss.

On October 30, RBC's Amy Wu Silverman appeared on CNBC and outlined a strategy for investors to hedge risk in the stock market through the use of put options. Amy Wu Silverman believes that investors have gone long where they need to and are now hedging their positions. She provided insight into the current state of the options market, with a particular focus on mega-cap tech stocks commonly referred to as MAG7. Silverman noted a stark contrast between the first half of 2024 and current market sentiment in the second half of the year as the market prepares for key earnings reports this week. There was remarkable exuberance among investors in the early months, driven by fear of missing out on AI opportunities. This led to an increase in call buying to the upside. However, this trend has now moderated, suggesting that investors have largely established their positions and are now more focused on hedging their investments rather than aggressively pursuing new upside.

Silverman emphasized that while these mega-cap tech stocks are generally bullish, many investors are seeking protection for their long positions. This protective stance is particularly relevant in a year in which AI advances have significantly impacted market performance. The conversation also highlighted the term “overhang,” which Silverman described as her word of the day. This concept reflects uncertainty surrounding upcoming major events, including earnings reports from mega-cap technology companies, the US presidential election scheduled for November 5, and Federal Open Market Committee (FOMC) meetings. She said this overhang creates a challenging environment for investors as they have to manage daily market fluctuations while anticipating future developments.

Silverman noted that investors are closely monitoring volatility expectations. An important metric in this context is the volatility risk premium, which measures how future volatility expectations compare with actual market movements. Currently, this premium is significant, suggesting that traders are anticipating increased volatility in response to upcoming data releases and events. Concern is growing among investors that the Fed's expected rate cut may not happen if economic data turns out to be stronger than expected.

In addition to technology stocks, she discussed the volatility of the oil market amid geopolitical tensions in the Middle East. Silverman noted that upside hedging has increased related to these geopolitical risks. Investors are trying to determine whether the high volatility risk premium is due to political uncertainties or ongoing geopolitical factors impacting energy markets. To mitigate these risks, she recommended considering energy proxies such as XOP or XEG in Canada as a potential hedge against escalating geopolitical tensions.

Before concluding her remarks, Silverman shared a concrete strategy for options trading ahead of the election: S&P set spreads for November expiration. This strategy involves buying close-to-the-money put options while simultaneously selling additional out-of-the-money put options. Given the S&P 500's recent rally and the host of significant events on the horizon, she described this approach as an effective insurance mechanism against potential market downturns while taking advantage of current volatility conditions.

methodology

We looked through several threads to compile a list of the 30 hottest stocks. We then selected the 10 stocks that were most popular among elite hedge funds and where analysts were bullish. The stocks are ranked in ascending order by the number of hedge funds that have an interest in them (as of Q2 2024). The hedge fund data comes from Insider Monkey's database, which tracks the movements of over 900 elite money managers.

Why do we care about the stocks hedge funds invest in? The reason is simple: Our research shows that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points (SFurther details can be found here).

A close-up of a complex looking circuit board with multiple integrated semiconductor parts.

Number of hedge fund owners: 108

Advanced Micro Devices Inc. (NASDAQ: AMD) is a semiconductor company that designs and manufactures microprocessors, including the Ryzen and EPYC series, as well as graphics processing units (GPUs) under the Radeon brand. It is a key competitor to other major semiconductor companies, particularly in the CPU market, offering processors for personal computers and servers. Its GPUs are also used in gaming, data centers and AI applications.

The company's AMD Instinct MI300X is a powerful AI accelerator designed for high-performance computing and GenAI tasks and is becoming increasingly popular among cloud companies, computer manufacturers and AI companies. Large technology companies such as Microsoft and Meta use the MI300X for their AI projects.

The company delivered strong third-quarter results and beat revenue expectations with a 17.57% year-over-year increase to $6.82 billion. Data center and client processor revenue contributed to this growth, offsetting declines in the gaming and embedded segments. Earnings per share rose 31%.

AMD is acquiring technology company ZT Systems to improve its AI capabilities. With this acquisition, the company strengthens its expertise in designing AI infrastructures, which will help the company better compete in the overall market. The agreement is expected to close in the first half of 2025. Additionally, the next-generation MI325X GPU was launched, offering up to 20% higher performance for AI tasks. The company is focused on AI and has significantly developed its product portfolio and partnerships, positioning it for further growth.

Columbia Threadneedle Global Technology Growth Strategy announced the following on Advanced Micro Devices, Inc. (NASDAQ:AMD) in the second quarter of 2024 Investor letter:

“Advanced Micro Devices, Inc. (NASDAQ:AMD) shares lagged the market after the company reported earnings results that, while broadly strong, left the market hungry for more. The company reported AI revenue of approximately $600 million and raised its forward-looking guidance for AI revenue growth, but shares took a breather as results fell short of elevated expectations following the stock's strong performance. Despite the stock's underperformance in the quarter, the company's AI story remains largely intact. The company’s growth prospects are supported by improving cloud demand, enterprise recovery and continued share gains ahead of the launch of the company’s new AI product.”

Total AMD takes 7th place on our list of stocks to buy according to Redditors. Recognizing AMD's potential as an investment, we believe AI stocks hold promise for delivering high returns in a shorter period of time. If you're looking for an AI stock that has more promise than AMD but trades at less than 5 times earnings, check out our report on it cheapest AI stock.

READ MORE: The 8 Best Wide Moat Stocks to Buy Now And The 30 most important AI stocks according to BlackRock.

Disclosure: None. This article was originally published on Insider Monkey.

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