1 Stock Politicians Are Buying Hand Over Fist
Examining what stocks U.S. politicians have bought and sold has become a popular trading strategy lately. Because of their information access, they may have more information available to them (especially when it comes to policymaking decisions), which gives them an edge in the market. However, their trades must be made public so their activity is available to the public after a short while.
One stock that various politicians like Michael McCaul, Josh Gottheimer, and Markwayne Mullin have been loading up on is AMD (NASDAQ: AMD). Since December, various politicians have purchased around $345,000 worth of AMD stock, while only $49,000 has been sold. This is pretty one-sided, so investors are taking note.
But is this enough of a factor to warrant buying AMD shares? Let's take a look.
AMD's product lines span many industries
AMD, or Advanced Micro Devices, competes in the computing market. It offers a wide variety of products ranging from data centers to PCs to embedded processors. This makes AMD a fairly large business, with competitors on all sides of the market.
On the data center side, it's competing with Nvidia (NASDAQ: NVDA) to fill the demand for artificial intelligence (AI) computing power. However, AMD is quite frankly getting crushed in this competition. In its latest quarter, Nvidia's data center revenue grew an unbelievable 409% year over year. AMD's data center division rose 38% year over year in Q4 FY 2023 and 80% in Q1 FY 2024. Clearly, AMD is not doing as well in this field, as Nvidia is eating its lunch.
This is likely a side effect of AMD's size, as its resources are spread out across many product lines instead of focusing solely on graphics processing units (GPUs) like Nvidia. This becomes evident when you look at the total employee count.
AMD Total Employees (Annual) data by YCharts
Not only does Nvidia have more employees, but with its sole focus being on one product, it has the resources to defeat AMD in the GPU market. This is why AMD has usually played second fiddle to Nvidia for some time, at least in the GPU market.
Excluding the data center division, which is still seeing strong demand despite having inferior products, AMD isn't doing so well.
AMD isn't doing great, yet it carries a premium price tag
The remaining divisions of client, gaming, and embedded had a mixed bag of results in Q1.
Segment | Quarterly Revenue | YOY Revenue Growth | QOQ Revenue Growth |
|---|---|---|---|
Data Center | $2.34 billion | 80% | 2% |
Client | $1.37 billion | 85% | (6%) |
Gaming | $922 million | (48%) | (33%) |
Embedded | $846 million | (46%) | (20%) |
Data source: AMD. YOY = Year over year. QOQ = Quarter over quarter.
The client division, which supplies processors and other computing products to OEM PC and commercial workstation producers, obviously saw a great quarter. However, this is a result of the recovery of the PC market, which struggled over the past year after a lot of revenue was pulled forward in 2020 and 2021, when many people purchased new computers during the pandemic. AMD's other two divisions struggled and saw a huge amount of revenue disappear compared to last year.
Altogether, AMD's revenue only inched 2% higher in Q1. It also barely squeaked out a profit, with earnings per share (EPS) coming in at $0.07, although this is an improvement over last year's $0.09 loss.
Wall Street expects AMD's year to improve, as an average of 39 analysts predicts about 12.5% revenue growth for 2024. But that pales in comparison to how quickly Nvidia is growing.
All this may be forgotten if AMD could be purchased for a reasonable price, but it's still more expensive than Nvidia on a forward P/E basis despite being an inferior business.
AMD PE Ratio (Forward) data by YCharts
Although politicians may be buying AMD stock, I'm avoiding it like the plague. There's no reason to own AMD when there are much better businesses like Nvidia.
Should you invest $1,000 in Advanced Micro Devices right now?
Before you buy stock in Advanced Micro Devices, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Advanced Micro Devices wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $580,722!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 13, 2024
Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
