This artificial intelligence (AI) stock is a bargain right now and could skyrocket in 2025.

Among investment opportunities in the field of artificial intelligence (AI), semiconductor stocks have become a top choice. Nvidia has been the most popular among chip stocks over the past couple of years, and for good reason. The company’s graphics processing units (GPUs) play an important role in the development of generative AI, and businesses around the world can’t seem to get enough of what Nvidia has to offer.

While this remains a solid opportunity at the intersection of semiconductors and AI, I see another stock that currently appears to have better value. Below I will break down the current price action around Advanced microdevices (AMD -1.27%). And I’ll tell you why I think the company is well-positioned for years of robust growth despite a tough showdown with Nvidia.

What’s going on with AMD stock?

The chart below illustrates the price movements between AMD and a number of major semiconductor stocks, as well as the VanEck Semiconductor ETF over the past year. Unlike its peers, AMD shares have fallen significantly, and as of January 14, the stock was hovering near its 52-week low.

AMD data by YCharts.

Considering how integral chips are to the development of AI, what is causing AMD stock to sell off while its competitors enjoy overwhelming support from investors?

From what I can gather, the negative sentiment surrounding AMD comes down to growth – or lack thereof. Currently, the company’s revenue is growing at a modest 18%. Compared to Nvidia, with near triple-digit sales growth, this seems disappointing. However, I think investors cannot find the forest behind the trees.

AMD is growing faster than you probably think

While AMD’s overall revenue growth may appear moderate compared to the competition, it’s crucial to examine the finer details before jumping to a conclusion. The company divides its revenue into four main categories: data center, client, gaming and embedded.

At the moment, the company’s gaming and embedded systems segments are not growing at all. Unfortunately, this lack of growth cannibalizes sectors of activity that are thriving. According to the company’s most recent financial report, data center activity grew 122% year over year, almost identical to that of Nvidia’s data center GPU segment.

Despite this impressive growth, AMD trades at a price-to-earnings-to-growth (PEG) ratio of just 0.3. This suggests that analysts may not understand how robust the company’s data center business is and therefore moderate its growth estimates. Note that a stock with a PEG ratio less than 1 generally implies that it is undervalued.

Why I think AMD stock could break out in 2025

This year is going to be interesting for the chip sector. Investors and Wall Street analysts will be weighing every possible statistic regarding Nvidia’s new Blackwell GPU, which is reportedly already sold out for the next 12 months. This is good news for Nvidia on the surface, but I think AMD has a big opportunity looming in the background.

Namely, this supply and demand dynamic provides an interesting opening for AMD in that the company can compete on price and offer an optimal solution when companies simply can’t get their hands on GPUs from Nvidia. Nor is it unreasonable to embrace such an idea.

A tailwind for AMD over the last year has been the notable adoption of its MI300 accelerators by hyperscalers, including Oracle, MicrosoftAnd Metaplatforms. While each of these companies also relies heavily on Nvidia’s GPU architecture, they have taken steps to diversify their AI infrastructure by supplementing their respective Nvidia stack with products developed by AMD.

Considering that AMD already has a line of successor chips scheduled for release in 2025 and 2026, I think the company has a good chance of benefiting from the continued shift in demand in the semiconductor landscape by proposing a number of alternative solutions. following Nvidia products – all at a more reasonable price.

To me, investors should focus on the growth trends around AMD’s data center GPU segment. If the company can continue to accelerate this specific part of its business profitably, then I think it’s only a matter of time before investors start to realize its scale and shares can start to rise. fly away.

I view AMD as an attractive long-term opportunity for AI investors and believe the current price decline makes it a lucrative time to buy the stock.

Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.