Advanced Micro Devices Inc. provided investors with some relief as it delved further into its artificial intelligence roadmap. While the chip company reported slightly better than expected earnings, the focus on Wall Street was more on AMD's future opportunities in AI. This is especially significant as rival Nvidia Corp. continues to dominate the AI accelerator market.
Ramsay rates the stock as outperform with a target price of $135.
Opinion: AMD's AI Era Takes Shape by Year's End
The positive results and commentary led analyst Christopher Danely from Citi Research to adopt a more bullish view on AMD shares. Danely stated, "We had thought AMD's AI products (MI300) would be margin dilutive, but the company stated it should be margin accretive." As a result, Danely upgraded his rating on the stock to buy from neutral and raised his target price to $136 from $120. He also admitted being wrong about investors growing tired of AMD's expensive valuation.
During Wednesday's premarket action, AMD shares were up 2%.
Srini Pajjuri, an analyst at Raymond James, has expressed optimism regarding AMD's progress in the AI space. According to Pajjuri, AMD has secured design wins with major industry players such as MSFT, META, and AMZN. He anticipates a significant contribution, potentially in the several hundred million dollars range, from these engagements by 2024. However, he also acknowledges that qualification cycles and gradual revenue ramps are to be expected in the industry.
Pajjuri holds a strong buy rating on AMD's stock and has set a target price of $145.
A Closer Look: Intel's AI Opportunity
While Pajjuri remains positive about AMD's prospects, Stacy Rasgon from Bernstein takes a more cautious stance. Rasgon points out that AMD executives themselves have indicated a second-half loaded trajectory, which could limit growth next year. Additionally, there is a lack of specific details or specifications to assess the level of customer interest in AMD's AI offerings. Consequently, Rasgon believes that estimates for AMD's future performance may be overly optimistic, and he maintains a market-perform rating on the stock with a target price of $95.
Rick Schafer of Oppenheimer echoes Rasgon's sentiment, citing the difficulty of accurately modeling AMD's AI strategy due to the absence of design-wins and timelines. He opts to remain on the sidelines until there is more clarity.
Schafer has assigned a perform rating on the stock.
In summary, while there is positive sentiment surrounding AMD's foray into AI, analysts remain cautious due to the lack of concrete information and the need for further validation of the company's strategy. As the industry evolves, time will unveil the true potential of AMD's AI initiatives.
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