The timing could not be more perfect to buy this savviest of U.S. stocks. China’s DeepSeek shockwave triggered fear and panic among artificial intelligence (AI) investors, creating an opportunity for value seekers to buy this stock at a discount. The stock in question is Advanced Micro Devices (NASDAQ:AMD), which has dipped 45% from its March 2024 peak.
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The correction in this U.S. stock
AMD stock has been in a downturn as Wall Street penalized the company for its late entry into the AI space with its AMD Instinct MI300 Series in December 2023. While this data centre chip drove AMD’s stock price up 115% between November 2023 and March 2024, the stock saw a seasonal correction.
However, the correction continued in the fourth quarter of 2024 as AMD stock failed to pick up momentum even after the launch of its MI325X data centre AI chip.
At the start of 2025 came the DeepSeek sell-off. The fear that an AI platform like DeepSeek could be built at a fraction of AI hardware cost and reduce AI infrastructure spending was overblown. This was proven at the AI Action Summit in Paris on February 10 and 11, where the European Commission committed to spend $209.2 billion on AI infrastructure.
AMD stock could continue its downturn in the first half of 2025 due to seasonal weakness. However, the stock could pick up momentum in the second half for its AI savviness.
The AI savviness of this U.S. stock makes it a buy right now
AMD’s AI delays were not about AI denial. Nvidia’s (NASDAQ:NVDA) next-generation Blackwell AI data centre chips started production in the fourth quarter of 2024 due to a production delay. This gave AMD time to play catch up and begin volume production of MI325X in the fourth quarter. MI325X delivers better performance and total cost of ownership than Nvidia’s H100 graphics processing units (GPUs). However, it is still behind Nvidia’s H200 GPUs.
AMD has pulled ahead with the launch of the Instinct MI350 Series powered by its next-generation CDNA 4 architecture to mid-2025 from the second half of 2025. The MI400 series is planned for 2026. This roadmap will reduce the gap between AMD and Nvidia.
AMD’s increased AI offerings could give clients a close and cost-efficient substitute to Nvidia’s data centre chips. This could put pricing pressure on Nvidia, slowing the 75% gross margin and 57% net profit margin it enjoyed in the third quarter of fiscal 2025.
AMD vs Nvidia: Who will dominate the 2025 data centre rally?
With AI investing set to increase in 2025, AMD’s latest AI chips could drive its data centre revenue. Let’s take a close look at the data centre rally of the last two years and its impact on the two company’s earnings.
| NVDA Q3 2024 | NVDA 2023 | AMD 2024 | AMD 2023 | |
| Data Centre Contribution to Overall Revenue | 87.7% | 78% | 48.8% | 28.6% |
| Gross Profit Margin | 75% | 73.8% | 53% | 50% |
| Operating Profit Margin | 66% | 61% | 24% | 21% |
| Net Profit Margin | 57% | 53% | 21% | 19% |
The data centre is a high-margin business and a higher mix in the revenue drives profit margins. Nvidia’s data centre (DC) revenue contribution jumped from 78% in calendar 2023 to almost 88% in the third quarter of 2024. However, the contribution growth slowed. AMD saw the DC contribution jump to 49% only on its MI300 series. This year could see higher DC revenue from the MI325X and MI350 Series – a 70–75% revenue contribution from DC could boost its gross margins beyond 53%.
While Nvidia’s data centre rally could continue in 2025, the profit margins could reduce because of competitive pressure from AMD.
Invest $5,000 in this U.S. stock
While AMD is catching up with Nvidia in the data centre space, its stock is still behind Nvidia. AMD stock is trading at 24 times forward earnings per share (EPS) below Nvidia’s 32.5 times, making the former an attractive value stock to buy now before the downtrend reverses. You could consider investing a little over US$5,000 in AMD. The stock could double your money in a few months once investors realize AMD’s AI savviness.
