AMD is a strong AI growth story, but the speaker prefers waiting for a pullback to $370 via put selling rather than buying now.

I am preparing to invest nearly $40,000 into one stock. And it's a company I believe could be one of the biggest beneficiaries of the AI boom over the next several years.

For this company though, revenue is exploding. Its data center business, and that's going to give you a clue right there, just grew more than 100%. Its AI opportunity continues getting even bigger. And the company is not Nvidia.

But here's the thing. When it comes to the stock I'm about to invest 40,000 into, I'm not buying it today. At least not at today's prices. And if this stock falls to the price I want, I'll potentially buy a 100 shares for $37,000 to be exact.

The company, you might ask, well, it's AMD or Advanced Micro Devices.

So today, I'm going to show you why I'm willing to put nearly $40,000 behind AMD, why Nvidia's earnings latest report actually made me even more bullish on AMD, the enormous opportunity I see ahead, and finally, I'll show you the exact option strategy I'm considering to potentially buy AMD at $370 per share, and why I'm choosing that particular level.

let me know where do you sit when it comes to AMD. Would you rather own AMD or Nvidia over the course of the next 3 years?

And when I think about stocks on my list right now, AMD has got to be near the top.

Because I'm not investing under the assumption that AMD has to beat Nvidia. That's never been my thesis. My thesis is AMD only needs to capture a meaningful percentage of an AI compute market that is becoming even more dramatically larger.

If you told me Nvidia's growth was collapsing and data center revenue was slowing, hyperscalers were cutting back their spending, AI labs were cancelling projects, then I would be much more concerned about AMD.

But that's not what Nvidia just told us. Nvidia's revenue doubled, data center revenue more than doubled, and management is still talking about enormous amounts of infrastructure investment coming ahead.

To me, that says the Pi is still getting bigger, and AMD doesn't need the entire pie.

Now, with that being said, let's talk more specifically about AMD because I think investors who still view AMD as simply the cheaper Nvidia alternative, well, they're missing the point on what's happening inside the company.

AMD now has several major growth engines. The EPYC server CPUs, Instinct AI accelerators, their new Helios rack scale systems, networking, Ryzen, and increasingly an entire AI computing platform.

The numbers are starting to show it. And if you look at AMD's latest quarter, it was quite impressive. Total revenue, it reached 11.5 billion. That's strong by itself. But look at data center revenue, up 6.7 billion, over 100% year-over-year growth.

Data centers have now become AMD's dominant business. And that growth was driven by server processors and Instinct GPUs. The company reported non-GAAP EPS of $166, non-GAAP gross margins of 56% and data center operating margins of 31%.

This is not a company waiting around hoping AI eventually becomes meaningful. AI and data center are already transforming AMD's financial profile.

And there's another part of AMD that I think gets overlooked because everybody is obsessed with GPUs. AMD's server business. AMD's server CPU business has become extremely important and AI doesn't eliminate the need for CPUs.

Well, quite the opposite. In fact, AI systems still need CPUs for things like data processing, databases, orchestration, security, storage, applications, and managing increasingly complicated AI workloads.

So, when we talk about the AI buildout, AMD has multiple ways to win. It can sell you CPUs, GPUs, it can provide networking technology and increasingly it can provide the entire rack scale architecture.

This brings us to something I think is incredibly important and that's AMD Helios. For years, Nvidia's advantage wasn't simply we make faster GPUs. Nvidia increasingly sold an entire system, compute, networking, software, rack scale architecture, the whole thing.

AMD is now trying to do the same thing for themselves and that's where Helios comes in. that combines AMD's Instinct MIG GPUs, EPYC CPUs, networking, and software all into their very own rack scale AI platform.

And we're already seeing major customers place orders. AMD says Helios is being deployed by companies such as OpenAI, Microsoft, Meta, Oracle, Anthropic, and others. That's a big deal, and those are big names.

And this is where the potential upside starts getting really interesting. AMD already has a multi-year agreement with OpenAI to deploy its AI chips. And AMD recently announced a strategic agreement with Enthropic involving deployment of up to 2 gawatt of AMD Instinct MI450 GPUs through Helios racks.

Microsoft, they're already planning to deploy Helios and the sixth generation CPUs at scale across their Azure.

That's how AMD starts proving that it can become a legitimate number two player in AI compute. And here's where my thesis gets particularly interesting. AMD has laid out an extraordinary ambitious long-term target.

Management believes its data center business can eventually reach a hundred billion dollars in annual revenue. That's enormous compared to where they're at right now. And it tells you the size of the opportunity management believes it's pursuing.

Again, AMD doesn't need Nvidia to fail. And actually, I think it works the opposite way. If AI infrastructure spending continues scaling from hundreds of billions towards potential trillions of dollars, there can be multiple enormous winners.

Nvidia can win, AMD can win, Broadcom can win, Taiwan Semi, memory companies, networking, power.

And AMD has another advantage, competition. Think about this from Microsoft's perspective or Meta, Oracle, OpenAI, you name it. Do you really want your entire AI infrastructure strategy dependent upon one supplier?

Probably not. Competition creates supply chain diversification, which has been a major issue, pricing leverage for businesses, architecture, flexibility, and negotiating leverage.

but there's a very logical reason for hyperscalers to want AMD to win as well. And that's another reason I don't think AMD needs to dethrone Nvidia for the investment thesis to work.

All of this sounds great, Mark. And if I'm so bullish on AMD, why don't I just buy the stocks at current levels? I want to own them anyways, right?

So, when we jump over to my stock investors valuation site, which all subscribers get access to inside my community, we can see AMD receives an edge score of 65. I prefer companies with scores above 70.

And when you look more closely, the category that's really weighing down the score, it's valuation.

And when I look at AMD, we can see earnings are expected to double again next year to $1545 per share, giving the stock a forward PE of around 30x. That equates to a PEG ratio well below one, which I also love to see for growth stocks.

Looking at another valuation angle, we can see that EV to Ebida, which on a forward-looking basis, it's trading around 35 1.5 times compared to a 5-year average that's closer to 31.5.

So, a little elevated from that standpoint. But when you include full 2027 EBITDA which is around $28 billion according to analyst estimates, we have an EV to Ebida that's actually below 30X. So, and that's very intriguing.

Another is when you look here at the chart, we see a stock that's been making lower highs, but on the positive side of that, the lower the lows are actually holding relatively firm.

So, that could support a near-term breakout. But what else do we see a little lower? It's an open gap period between 405 all the way down to 360.

So for me, I'm kind of aiming at that 370 range because from a valuation perspective, that would be quite intriguing. But it also protects against a backfill on that open gap when looking at the chart.

So with that, I'm looking to sell a $370 put, which allows me to get paid to wait on a stock. And as you can see here, the 370 put expiring on October 16th. Well, that's going to pay me $350 per contract.

I'm earning $350 in income right from the get-go. I'm getting paid to buy a stock I want to buy at a price I want to buy it at.

I'm potentially committing nearly $40,000 to AMD, but I'm not buying the shares at today's market price. I'm saying I'll buy a 100 shares per contract, but only if they drop down to 370 or lower.

Outcome number one, AMD stays above 370 through expiration. Assuming I hold the put through expiration, it expires worthless. I generally that means I keep and earn the 100% of that premium, that $350, I don't get any shares and I can reassess the situation.

and maybe AMD from a valuation perspective at that point just continue to climb higher and now it's just more expensive. We'll make that decision at that time. But now let's look at outcome number two.

If AMD falls below the 370 target price, well, I'm going to get assigned. I am now on the hook to buy 100 shares per contract at the 370 strike price, meaning $37,000. But again, I'm not buying at today's price of $470 where shares are, but rather down at 370.

So, a much larger profit potential for me. I view it as a higher margin of safety.

Number two is execution. This always comes for any company. AMD has to execute on their MI450, Helios, ROCM, EPYC, which is their CPUs, customer deployments, and its product roadmap.

The opportunity can be enormous, and AMD can still fail to capture enough of it.

Third is going to be expectations. AMD shares have already had an enormous run, up well over 100% in the past year alone, and we've recently seen how demanding investors have become.

AMD's latest quarter produced over a 100% data center growth. Yet shares still sold off after earnings because investors wanted clear evidence of an even bigger AI payoff. That's what happens when expectations become elevated.

Fourth, AI spending. The biggest risk to the entire thesis. What if the AI infrastructure boom slows dramatically? What if hyperscalers eventually decide we've built enough capacity or we need to slow down on our spending?

That would affect more than just AMD. It would impact the likes of Nvidia, Taiwan Semi, Broadcom, all the memory stocks, networking, data centers, power, the entire ecosystem.

Then we turn to AMD. AMD reported 11.5 billion of revenue, 6.7 billion coming from data centers and 107% data center growth. Helios is ramping. CPUs continue growing. Instinct deployments are scaling.

Major customers are deploying AMD infrastructure. And the overall AI compute market continues expanding at a rapid pace.

So yes, I want more AMD in my portfolio, but I'm also entering September with patience. I don't need to chase it. Instead, I'm looking to sell the 370 October 16th cash secured put,

If I told you AMD would fall to 370 over the course of the next month or two, would you be a buyer at those levels? And if not, what's your price? What are you looking for the stock to fall down to?

Is it 350, 325, 300? or do you think AMD is going significantly higher over the next couple of months?

And remember, this is a win-win for me because I already own shares of AMD. So, it's a win if they continue to climb higher. My shares gain in value. I earn a premium and it's a win if they drop because I'm adding to my position $100 per share below current prices.