Advanced Micro Devices (AMD) is generating buzz as it gears up to compete with Nvidia in the artificial-intelligence semiconductors market. While Wall Street analysts have mixed opinions on AMD’s prospects, the company recently reported impressive earnings that have captured investors’ attention.
Despite providing guidance that didn’t meet expectations, AMD’s positive future in AI chips has overshadowed any concerns. The key to its narrative lies in the success of its upcoming MI300X chip, set to be launched in the fourth quarter of this year. This chip will directly challenge Nvidia’s graphics-processing units, vying for a larger stake in the AI technology market.
At Citi, analysts view this news favorably. Christopher Danely from Citi stated, “We were wrong in our assumptions that AMD’s AI products (MI300) would negatively impact margins and that investors would eventually be concerned about its expensive valuation.” As a result, Danely upgraded his rating on AMD stock from Neutral to Buy, with a target price of $136, up from $120. This new target is based on a price-to-earnings multiple of 40 times AMD’s projected 2024 earnings, taking into account its increasing server share and AI growth potential.
The stock market has also responded positively, with AMD shares rising 1.4% to $119.32 in premarket trading on Wednesday. The previous day saw a 2.8% increase in share value.
In conclusion, Advanced Micro Devices is gaining momentum as it prepares to challenge Nvidia in the AI semiconductor market. With solid earnings and the promising MI300X chip on the horizon, AMD’s future looks optimistic.
AMD’s Prospects in the AI Chip Market
KeyBanc’s John Vinh remains optimistic about AMD’s potential in the AI chip market. He predicts a significant increase in MI300X deliveries next year, resulting in about $2 billion in GPU revenue. Vinh, who maintains a $160 target price for AMD and an Overweight rating on the stock, praises the company’s revitalized product roadmap strategy and compelling product traction.
While AMD Chief Executive Lisa Su acknowledges that Nvidia currently holds a key advantage with its software capabilities, she expects there will be “multiple winners” in the AI chip race. AMD is investing in its software capabilities to compete effectively.
Analysts generally believe that Nvidia will continue to dominate the AI chip market for the foreseeable future, although its market share may drop from around 90%. Furthermore, AMD is expected to secure second place, surpassing Intel (INTC).
Oppenheimer analyst Rick Schafer recognizes the challenge AMD faces in gaining AI market share against Nvidia’s A100/H100 accelerators and software ecosystem. He states that AMD has yet to reveal how it plans to win over major customers in the AI field. Schafer’s base case scenario suggests that AMD’s GPU share will be limited to the lower end of the market.
As for Schafer’s recommendations, he maintains a Perform rating on AMD stock without providing a target price.
