Afford a grand? Consider these two stocks as potential budget-friendly investments for 2025 and beyond.
The growth prospects and investment value of Advanced Micro Devices (AMD) and Dell Technologies (DELL) in the AI sector appear robust and promising based on recent financial performance and future earnings forecasts.
### Advanced Micro Devices (AMD)
Advanced Micro Devices reported GAAP revenue of $7.44 billion in the March quarter, reflecting a 36% year-over-year increase. The company's gross margin expanded to 50%, up 3 percentage points, indicating improved profitability despite product mix shifts. This strong revenue and margin growth is largely driven by AMD's AI-related product demand, such as CPUs with integrated neural processing units for local AI workloads.
AMD's collaboration with Dell enhances its AI growth potential. AMD powers Dell AI PCs and servers, which feature advanced AMD Ryzen™ AI PRO CPUs designed for high-performance AI processing with local data security and low latency. This partnership is accelerating innovation and market adoption in AI systems, spanning from development to deployment.
### Dell Technologies (DELL)
Dell is experiencing a significant surge in AI server demand, with orders reaching $12.1 billion in Q1 fiscal 2025, surpassing the entire AI revenue from the prior fiscal year. The AI server backlog is projected to be approximately $5.6 billion by the end of fiscal Q4 2025, indicating strong future revenue streams. Dell’s infrastructure solutions, which include AI-optimized servers, constitute 44% of its revenue and saw a 12% year-over-year revenue growth in Q1. Segment operating income rose 36%, driven by AI demand, and the company's total revenue grew 5% year-over-year with a 17% increase in earnings per share.
Despite overall sluggish growth in the traditional PC and server markets, Dell is trading at a relatively cheap forward P/E multiple of about 12.5, which may undervalue its AI-driven growth. As infrastructure and AI workloads grow, the market is expected to re-rate Dell's stock upward, potentially delivering market-beating returns over the next five years.
### Combined Outlook
The partnership between AMD and Dell is a key strategic advantage in AI, with Dell deploying AMD-powered AI PCs and servers designed for enterprise AI needs. This partnership enhances both companies' growth trajectories in AI infrastructure and edge AI computing.
Both companies are benefiting from the broader AI infrastructure boom, including enterprises accelerating the migration of generative AI workloads on-premises for cost efficiency, favoring Dell’s server offerings and AMD’s AI-centric processors.
### Summary Table
| Metric / Aspect | AMD | Dell Technologies (DELL) | |------------------------------------|----------------------------------|-----------------------------------| | Recent Revenue Growth | 36% YoY (Q1 2025) | 5% YoY overall; 12% AI infra | | Gross Margin | 50%, expanded 3 p.p. | Improved margins in infra segment | | AI Server Orders/Backlog | Partnering in AI PCs/Servers | $12.1B Q1 orders; $5.6B backlog | | AI Segment Revenue % | Not specified individually | 44% of total revenue | | Earnings Growth | Strong margin expansion | 17% EPS growth YoY | | Valuation (Forward P/E) | Not specified | ~12.5 (potentially undervalued) | | Strategic Partnership | Powers Dell AI PCs/servers | Integration of AMD tech in AI infra| | Investment Outlook | Strong growth, AI-driven margin | Long-term AI infrastructure growth|
Both AMD and Dell Technologies are well-positioned to capitalise on the AI infrastructure boom, showing strong revenue growth, expanding margins, and growing order backlogs driven by surging AI demand. Dell’s stock may offer attractive investment value due to its current valuation discount and improving AI business, while AMD’s solid financial performance and innovative AI processor technologies support sustained growth. Their ongoing collaboration further strengthens their competitive positions in the AI sector.
Notably, AMD's management does not see near-term macroeconomic headwinds impacting its outlook, and Dell's stock is trading at a forward P/E of 13, offering potential value for investors.
In the context of the AI sector, Advanced Micro Devices (AMD) and Dell Technologies (DELL) are capitalizing on robust growth prospects, with AMD reporting a 36% year-over-year increase in revenue and expanding gross margins to 50%. Dell, on the other hand, is witnessing a surge in AI server demand, with orders reaching $12.1 billion in Q1 fiscal 2025, fueling a 12% year-over-year revenue growth in its infrastructure segment. The combined outlook for these companies suggests a strong investment potential, as they reinforce each other's growth trajectories in AI infrastructure and edge AI computing, particularly benefiting from the migration of generative AI workloads on-premises. Moreover, Dell's stock could provide attractive investment value due to its current valuation, while AMD's innovative AI processor technologies support sustained growth.
