Speaker is bearish/neutral on buying AMD now; cites poor returns on capital and high valuation dependent on future growth, stating he likely won't buy unless revenue estimates are wrong.

If you own shares of Nvidia, AMD, or Palantir, you are told to hold on, buy on the dip, and strengthen your positions because a multi-billion dollar wave is coming.

Well, the latter is AMD, also known to this channel's followers as " AMD Nuts". This is interesting because AMD seems to be the weakest link or the exception. It is not a media-hyped stock like Palantir, nor is it a king like Nvidia.

It's the alternative. So, let's see if that actually makes it a better buy.

Well , the first bullish argument, price versus value is actually reasonable. Unlike Nvidia and Palantir, AMD stock is trading at a much more reasonable forward price-to-earnings ratio .

If you believe that AI expansion is real, but don't want to pay a hefty premium to participate , AMD may be the way for value investors to enter this trade.

The second bull's argument: everyone wants a second option. It's like wanting to be the least expensive homeowner in your neighborhood. Microsoft, Meta , and Oracle – these companies are desperately searching for a second chip supplier so they don't become entirely dependent on Nvidia.

AMD's MI300 and MI325 chips are being widely adopted as an alternative. The demand for a non- Nvidia option is huge, and AMD fits that perfectly.

The third argument of the bulls: the story isn't just about artificial intelligence. AMD is also taking a significant market share from Intel in both PCs and data center servers.

This gives them a diversified cash flow engine that is not entirely dependent on the AI noise cycle for survival.

The first argument of the bears: profit margins are too bad . Nvidia operates with a gross profit margin of 75%. This means that from each segment they sell, after paying all the direct costs associated with it, 75% of it goes as profits to cover general expenses and taxes.

As for AMD, its margins range between 47 % and 50%. This is no small gap, guys. This is a completely different business model. Because AMD is lowering prices than Nvidia to gain market share, it incurs higher costs for every chip it sells.

This means significantly less free cash flow for every dollar of revenue .

The second bears' argument: the stock isn't actually cheap. This is the point that deceives people. Everyone says AMD is a value deal, but it still trades at more than 100 times its after-earnings.

This means that the actual profits the company is currently making do not justify the share price in any way. You are not paying for what AMD is now, you are paying for what you hope it will become .

The third bears' argument is that they are under pressure from both sides. AMD is trying to fight Nvidia at the top of the AI market, while Intel is trying to regain its share of the processor market from below.

Moreover, their biggest potential customers, Google, Amazon and Meta, are building their own chips internally. AMD is stuck in the middle.

So, let's open the AMD data in our program and review the eight pillars, the analysts' estimates, and then we'll take a look at the price they've set. Therefore, AMD's market capitalization is $760 billion.

Is it possible for a reasonable company to be sold for a trillion dollars or less? Look at this. The organization is valued at $763 billion . This means $4 billion in debt, and they generated $ 8.4 billion in free cash flow last year .

So, basically, less than 6 months of their free cash flow can pay off their debts.

And now, here's what's interesting. Very poor returns on capital. I don't know why it's so low. There is clearly a reason for this , but it is not a good sign for things. Guys, for the past five and ten years , they've had a very consistent profit margin of 10%.

It suddenly jumped to 15.6%. We must ask whether this situation will continue, or whether they will return to their previous profit margin levels.

Guys, the number of acquisitions is very small, but they have had revenue growth of over 20% in the mid- twenties over the past three, five and ten years. Let's move on to the eight pillars.

Four marks are correct, and four marks are incorrect. I should start guessing these results when we make a video. I should start by sitting there and saying, "Okay, before I go to the Eight Pillars, I'm looking at things."

"I think the result will be around this ." Therefore, we have a high price- to-earnings ratio and a high price-to- free cash flow ratio . We have poor returns on capital. The stock is slightly higher, up 1.65%.

This is nothing compared to other companies, but there is low debt, cash flow growth, revenue growth, and net income growth. Good?

So, let's move on to our analysts' estimates. wow. Herein lies the future. In growth. From $7.60 to $42 if analysts' predictions prove true over the next four years. And revenues skyrocketed from $51 billion to $240 billion during the same four years.

So, this is the essence of this growth story . People say it's actually quite plausible for a growth story like this.

So, here we are. Let's run our stock analysis tool. Okay, guys. So, here's our analysis of AMD over the past 10 years. Here are my predictions for the next ten years. Guys, I'm not going to lie to you.

My revenue growth numbers are horribly lower than I am, just me , you know what? I will raise my expectations. Because I want to make sure that I'm giving you what people really expect and what will happen. 14 and 20 , and these numbers are probably still low.

I would project revenue growth of 14%, 20%, and 26%. Analysts are taking into account much higher expectations. Is it optimism? I don't know. Remember, guys, that profit margins are less than free cash flow, and since free cash flow is more important, I will focus on it . 12%, 16%, and 20%.

As for the price-to- earnings ratio, I would put 18 , 22, and 26. I'm not going to lie to you guys. I would choose lower figures than these because of the poor returns on capital.

I will place 14, 18 , and 22. Finally, with no margin of safety and a return of 9.5%, I will press the analyze button. Guys, I got a low price between 70 and 95, a high price between 400 and 540, and an average price between 180 and 240.

However I analyze it, I probably won't buy unless I'm completely wrong about the revenue growth estimates. This is the big unknown here. The question is, are we at a constant level of explosive growth in artificial intelligence?