Advanced Micro Devices (AMD -2.36%) shares fell following its Q4 earnings report as its data center revenue soared but still came in below analysts' consensus expectations. The stock is now down more than 35% over the past year, as of this writing.

Let's dive into the chipmaker's fourth-quarter results to see if this dip in price could be a buying opportunity.

Data center growth in focus

AMD's data center business was in focus when the company reported its Q4 results. The segment's revenue surged 69% year over year and 11% sequentially to $3.9 billion. Both AMD's Instinct graphics processing units (GPUs) and EPYC central processing units (CPUs) helped drive the growth. However, analysts were expecting data center revenue to be $4.14 billion, as compiled by FactSet.

The company said that its EPYC CPUs continue to gain market share in the data center. Among hyperscalers, AMD now has a market share well above 50% for its EPYC CPUs. Meanwhile, AMD said Microsoft and Meta Platforms are both using its MI300X GPUs. It said it is seeing strong interest in its next-generation MI350 series GPUs, which it plans to ramp up around mid-year. AMD will launch its MI400 GPUs in 2026.

AMD's client segment, meanwhile, also grew strongly, with Q4 revenue climbing 58% year over year to $2.3 billion. AMD said it continued to gain market share in the personal computer (PC) retail space, including having over 70% market share on popular platforms such as Amazon, Newegg, and MindFactory. It is looking to outpace PC market growth in 2025, which it sees rising by mid-single digits. The company continued to see weakness in its video game and embedded segments. Gaming segment revenue plunged 59% to $563 million as its customers Microsoft and Sony worked on normalizing inventory. Embedded sales fell by 13%, hurt by weaknesses in industrial and communication markets.

Overall, AMD's Q4 revenue jumped by 24% year over year to $7.66 billion. Adjusted EPS, meanwhile, soared 42% to $1.09. That beat the analyst consensus for EPS of $1.08 on revenue of $7.53 billion, as compiled by LSEG.

Adjusted gross margins rose 320 basis points to 54%. This shows that the company is not just growing revenue but that its revenue is becoming more profitable as well.

For the quarter, AMD generated free cash flow of $1.1 billion and and $2.4 billion for the full year. It ended 2024 with net cash and short-term investments of $5.1 billion and $1.7 billion in debt.

Looking ahead, the company guided for Q1 revenue of between $6.8 billion to $7.4 billion. That would represent growth of 30% at the midpoint, showing continued revenue growth acceleration. The growth will be powered by strong growth in its data center and client businesses, offsetting a significant decline in its gaming business and a modest decline in its embedded business.

For the full year, it forecast double-digit percentage revenue and EPS growth year over year. It sees both its gaming and embedded segments having modest growth.

Image source: Getty Images.

Should investors buy the dip?

AMD is very unlikely to make any big inroads against rival Nvidia in the data center GPU market. The company just does not have the software platform to compete against Nvidia's dominance, especially in training. The company has carved a decent niche in AI inference as a viable alternative and should continue to see GPU growth as a result.

However, instead of viewing AMD as a GPU afterthought, perhaps it's best to view the company as the leading data center CPU company. This is the area where AMD has been thriving and taking market share. CPUs are not as big a component as GPUs when building out AI infrastructure, but they still play an important role, and AMD is seeing strong growth as a result. The company is also gaining share in the PC market as well.

From a valuation perspective, AMD trades at a forward price-to-earnings ratio (P/E) of under 24 times 2025 analyst estimates, with 41% EPS growth projected. That's a relatively attractive valuation.

If you think AMD is going to be the next big GPU winner, you'll probably end up being disappointed. If you want to play the GPU market and its increasing computing power needs, Nvidia is still the best option. However, if you can appreciate AMD for its strong position in CPUs and its growth in this area, then the stock looks like a solid option to buy on this dip.