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Redditors are optimistic about this AI stock

We recently published a list of The 10 best AI stocks to buy according to Reddit. In this article, we take a look at how Advanced Micro Devices, Inc. (NASDAQ:AMD) compares to other AI stocks.

As artificial intelligence becomes more prominent in current world affairs, new patterns are also emerging in terms of their research and development strategies. Traditionally, academia has focused on basic research and education, while industry has focused on applied research and commercialization. In recent years, however, the dominance of the commercial sector in AI investment and research has raised concerns about the balance of power. The movement of researchers from academia to industry has also raised questions.

Advanced AI systems increasingly require large amounts of data, computing power, and funding resources that industry has to a greater extent than academia and nonprofits. As a result, AI research, which was originally the domain of academia in the early 2000s, is now being taken over by industry.

We recently talked about this breakdown in another article we published. The 7 Most Popular AI Penny Stocks Andhe $5Here is an excerpt from it:

“A recent study from Stanford University found that companies are training AI models faster than academic institutions. In 2023, industry-trained AI reached nearly 51 significant machine learning models, while academic institutions managed only 15. This trend continued in 2024 despite rising training costs. ChatGPT 4, ChatGPT's latest model, cost about $80 million to train. Google's Gemini Ultra cost about $191 million.”

According to a 2021 Stanford report, the reason for the blurring of roles between academia and industry is that companies have affordable cloud computing, open-source libraries, and pre-trained models that encourage university researchers to use their work commercially. More and more industry papers are now appearing at conferences, raising concerns that applied research is hampering long-term innovation or biased toward corporate interests while accelerating solutions to real-world problems.

A 2023 article in the journal Science states that companies now attract 70% of top talent with a PhD in AI, compared to just 20% 20 years ago. The number of AI research faculty in academia has stagnated, while industry hiring has increased eightfold since 2006. A key reason for this is that industry models are much larger (about 29 times larger), suggesting superior computing power.

In 2021, U.S. government agencies allocated a total of $1.5 billion to academic AI research, while Google spent the same amount on a single project in just one year.

Today, 96% of the largest AI models are developed in industry. The most important benchmarks are also mainly developed by industry, accounting for 91% of the total. In addition, the number of published papers with industry co-authors has almost doubled since 2000.

But there is another shift on the horizon, as academic researchers are increasingly able to apply their inventions in the real world. Duolingo, a language learning app developed by academics, is a successful example of this.

Renowned MIT professor Frédo Durand believes that academia can still be a driving force for innovation today. He says that 25 years ago, the field of computer graphics in academia faced a similar resource imbalance, as industry created stunning visuals that academia couldn't keep up with. However, instead of trying to imitate industry, academia took a different path, focusing on ideas like advanced lighting simulations, fluid dynamics, and machine learning for animation. These seemingly outlandish ideas eventually became the foundation of modern rendering and graphics hardware.

Durand believes this approach offers valuable insights for AI research. He stresses the importance of science taking unconventional approaches, sharing its work openly and remaining enthusiastic about the field.

However, he recognizes the challenges facing academia and suggests possible solutions, including increased government funding of academic research, shared research infrastructure, and strategies to keep the best AI talent in academia. While industry in general seems to be adopting AI, collaborative partnerships with academia may yield better results. One way or another, AI will remain a hot topic in the future.

methodology

To compile our list, we combed through several active subreddits to compile a list of 15 AI stocks to buy. We then selected the 10 stocks that were most popular among elite hedge funds and that analysts were bullish on. The stocks are sorted in ascending order by the number of hedge funds that hold shares in them (as of Q2 2024).

Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (SFurther details can be found here).

A close-up of a complex looking circuit board with several integrated semiconductor parts.

Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of hedge fund owners: 108

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a major semiconductor company that designs and manufactures microprocessors, graphics processing units (GPUs), and other computer components, and is known for its competitive products in the gaming and high-performance computing markets.

Advanced Micro Devices, Inc (NASDAQ:AMD) impressed Wall Street with its second quarter results, where data center revenue grew 49% year-over-year. Total revenue growth for the quarter was 8.88%, resulting in total revenue of $5.84 billion, which was $113.81 million above estimates. Ryzen CPU sales increased 49% year-over-year. Gaming revenue fell 59% due to declining PlayStation and Xbox sales, but Radeon 6000 GPUs saw year-over-year sales increase.

The launch of the Instinct™ MI300 series accelerators in 2023, designed for AI and HPC workloads, continues to be a major contributor to the company's growth. This chip competes with Nvidia's H100 AI chip. The company now plans to launch new AI chips every year, including the MI325X by the end of 2024, the MI350 in 2025 (a competitor to Nvidia's Blackwell), and the MI400 in 2026.

Wedbush's Dan Ives believes the company's strong results and AI investments point to a promising future in the AI ​​market. He expects the company to benefit significantly from growing AI spending, which is estimated to reach $1 trillion in the next few years. Investors seem to agree, as 108 hedge funds held long positions in the company as of June 30. Fisher Asset Management had the largest share valued at $3,755,355,818.

Meridian Contrarian Fund announced the following on Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:

Advanced Micro Devices, Inc. AMD (NASDAQ:AMD) is a global semiconductor chipmaker that specializes in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which speed up the operations running on the CPUs. We invested in 2018 when it was a mid-cap value stock that had underperformed for many years due to lagging technology and was losing market share to rivals Intel and Nvidia. Our research found that changes and investments by current management under CEO Lisa Su over several years had finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel's. We invested because we believed that AMD's valuation at the time did not reflect the potential of its technology leadership to deliver significant market share gains and improved profits. This thesis has held true for several years. During the quarter, AMD revealed more details about its upcoming GPU products for the AI ​​market. The stock reacted positively to expectations that AMD's GPU servers will be a viable alternative to Nvidia. Although we have reduced and increased our exposure to AMD as part of our risk management, we have maintained our position in the stock. We believe that AMD will continue to gain market share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”

AMD total 6th place on our list of the best AI stocks to buy. While we recognize AMD's potential as an investment, we believe AI stocks hold promise to deliver high returns and do so within a shorter time frame. If you're looking for an AI stock that's more promising than AMD but trades at less than 5x earnings, read our report on the cheapest AI stock.

READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.

Disclosure: None. This article was originally published on Insider Monkey.

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