While the generative artificial intelligence (AI) boom has brought boatloads of capital into the technology industry, investors are becoming more selective about where they put their money.

With shares down by a whopping 32% from their all-time high of $211 in March, Advanced Micro Devices (NASDAQ: AMD) is rapidly falling out of favor despite its direct exposure to the industry through data center hardware sales. Let's dig deeper into the company's pros and cons to decide if it still has millionaire-maker potential over the long term.

Why is AMD stock crashing?

It's hard to know for sure why AMD's stock is collapsing, but a big reason could be its valuation. At their peak in March, shares traded for a jaw-dropping 340 times trailing earnings, which indicates that the market may have overestimated the company's growth potential.

Now, AMD's trailing price-to-earnings (P/E) ratio has fallen to a more reasonable 126. But this is still double Nvidia's trailing P/E of 63 and almost five times the S&P 500 average of 26 despite relatively modest expansion. Third-quarter revenue increased by only 18% year over year to $6.8 billion, while gross margin only grew a modest 3 points to 50%.

For comparison, Nvidia's third-quarter earnings jumped 122% to $30 billion, while its gross margin jumped 5 points to 75%.

To be fair, AMD's net income expanded by 191% year over year to $771 million in the period, which isn't too shabby. However, this result was influenced by factors like fluctuating acquisition-related amortization costs, which might not repeat in future quarters. Management reports a figure called adjusted net income, designed to smooth out these issues. It suggests the bottom line grew by a more modest 33% to $1.5 billion.

The data center business remains strong

One of the biggest differences between AMD and its rival, Nvidia, is their degree of exposure to the AI chip industry (served by their data center segments). While data center sales made up a whopping 88% of Nvidia's sales in the most recent quarter, this number is around 51% for AMD. Other AMD segments -- such as gaming hardware (which fell 69% in the third quarter) -- can still have a big impact on its results.

However, this trend may not hold over the long term, as relatively lackluster performance in AMD's other businesses causes its relatively fast-growing data center segment to represent a bigger share of sales.

Image source: Getty Images.

This trend has been compounded by the recent acquisition of ZT Systems -- a provider of AI and general-purpose computing infrastructure for cloud computing and other data center clients. The $4.9 billion deal could help AMD hold its own in the competitive AI hardware market. AMD is also keeping itself relevant through its new flagship AI chips, such as the Instinct M1325X, which is expected to launch in 2025 and compete with Nvidia's new Blackwell-based chips.

Is AMD a millionaire-maker stock?

When I think of a stock with millionaire-maker potential, I typically envision a small, overlooked company with a triple-digit growth rate. AMD certainly doesn't fit into that category because its diversified business model prevents its AI chip business from stealing the show right away. Stiff competition from Nvidia and others could also limit AMD's revenue and profit potential.

That said, after its massive stock price declines this year, AMD represents a much better value than it did before. And while investors shouldn't expect explosive returns in the near term, shares look capable of posting market-beating growth over the coming years. It might make sense to wait until the dust settles before considering a position in AMD.

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Will Ebiefung 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.