The Fool’s Take
Meet semiconductor company Advanced Micro Devices, a supplier of graphics processing units (GPUs) used for artificial intelligence (AI) training.
AMD finished 2024 on a strong note, with fourth-quarter revenue and adjusted earnings up 24% and 42%, respectively, year over year.
Wall Street analysts have expressed concern about how much money companies are putting into AI infrastructure. China’s DeepSeek claims it built a state-of-the-art AI model for only a few million dollars, prompting investor fears that less capital will go into one of AMD’s chief moneymakers, data center AI.
These worries appear overblown. AMD expects 2025 to bring strong growth in its data center business — and this is following 2024, when its data center segment grew 94% year over year.
Meanwhile, AMD’s Ryzen PC processors are selling well and appear well-positioned for continued momentum in the PC market, after Dell announced it would (for the first time) offer a full lineup of commercial PCs powered by Ryzen.
Investors can buy shares of AMD at a recent forward price-to-earnings (P/E) ratio of 25, attractive in comparison to the five-year average of 32. The stock makes sense as a long-term investment, though in the short run, it could face further challenges. (The Motley Fool owns shares of and recommends Advanced Micro Devices.)
Ask The Fool
From H.H., Teaneck, N.J.: What’s the least expensive brokerage for buying and selling stocks?
These days, you’ll find many major brokerages charging nothing per trade. That’s because they can make money in other ways. (For example, they charge interest when you invest “on margin” with borrowed money, and they may be earning interest on any cash in your account.)
We’re big fans of investing in great companies and aiming to hang on for many years — which results in trading less frequently. For that style of investing, trading commissions shouldn’t matter that much.
So When evaluating brokerages, consider factors that do matter a lot to you. These might include having a brick-and-mortar branch nearby, having banking services available or offering research reports from sources you respect.
You can learn about some well-regarded zero-commission brokerages at Fool.com/money.
From S.V., Arlington Heights, Ill.: To become a good investor, what subjects should I study?
It’s smart to learn about financial accounting so you can make sense of companies’ financial statements and spot red flags like shrinking profit margins or rising debt.
You might start with Financial Statements: A Step-By-Step Guide To Understanding and Creating Financial Reports by Thomas Ittelson (Career Press, $23).
Some solid books on investing include The Little Book That Still Beats the Market by Joel Greenblatt (Wiley, $28), The Little Book of Common Sense Investing: The Only Way To Guarantee Your Fair Share of Stock Market Returns by John C. Bogle (Wiley, $27) and The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey (Wiley, $28).
Simply reading broadly about great businesses and topics like psychology, science and history can also make you a better investor.
The Fool’s School
If you dip into financial news now and then, you’ll likely run across reports that some analyst has rated a certain stock a “buy,” “sell” or “hold.” Don’t give too much importance to such ratings, though, because they aren’t as meaningful as you might think.
There are three main kinds of stock analysts — “buy-side,” “sell-side” and “independent.” Buy-side analysts work for institutional money managers (such as hedge funds, pension funds and mutual fund companies) and prepare reports and recommendations about companies for their employers, helping them make investment decisions. You won’t generally see their reports.
Sell-side analysts often work for major brokerages, preparing research and ratings that other companies buy. You’re more likely to run across these analysts (sometimes on TV) and their ratings. These folks can have conflicts of interest, such as when their brokerage offers investment banking services for businesses. In such cases, offering a negative (“bearish”) report or rating can result in lost business, so it’s often avoided. Thus, “sell” ratings are rather rare (and wise to heed when they do happen).
Then there are independent analysts, who work for companies that don’t do investment banking work. They’ll frequently offer subscriptions to their reports. Pay more attention to their research. Many brokerages offer access to a wide range of analyst research reports. If yours does, check them out — and look beyond the “buy,” “sell” or “hold” rating for the discussion of risks and opportunities. There are more ratings than just those three — you might also run across “underperform” or “underweight,” suggesting that a company (and its stock) seems likely to perform below average.
Meanwhile, “outperform,” “overweight” or “accumulate” suggests that a company seems poised to perform above average. Finally, note that stock analysts turn out to be wrong much of the time, despite their best efforts.
Learn more about analysts by searching for “analyst recommendations” at SEC.gov.
My Smartest Investment
From R.R., online: My smartest investment move? Well, in January 2016, I sold off some poorly performing stocks and purchased just one share of a particular stock. That one share cost me $194,000. It was for Warren Buffett’s company, Berkshire Hathaway. Buffett was buying back shares at the time and suggesting that it was a good time to buy. That single share was recently worth more than $700,000. The question now is when should I sell it?
The Fool responds: What a great investment! Over nine years, you averaged a solid average annual gain of more than 15% — a bit higher than that of the S&P 500. Some readers may be incredulous about those six-digit share prices, but they’re accurate.
When Buffett took over the company in 1965, the share price was around $19 — just $19. He has never split those shares, so they simply kept growing in value — to more than $700,000 apiece recently. In 1996, Buffett did introduce “Class B” (the pricier ones became “Class A”) shares — with much lower prices, making shares more affordable for average investors. (Berkshire B shares recently sold for $478 apiece.)
When should you sell? Perhaps when you need that money, or if you spot a much more compelling investment.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Who Am I?
You could trace my roots to the 1997 founding of an online travel company that let you name your own price. In 2004, I acquired ActiveHotels.com, and a year later I bought the company whose name I would later bear.
I was added to the S&P 500 index in 2009 and became the world’s largest online hotel reservation system in 2010. Today, with a recent market value near $164 billion, I’m home to brands such as Priceline, Agoda, Kayak and OpenTable. More than a billion room nights were booked through me in 2024.
Who am I?
Forget last week’s question? Find it here.
Last week’s answer: Walmart
