AI trade faces key test before Nvidia earnings: AMD’s analyst day
Advanced Micro Devices on Tuesday will host its first financial analyst day in three years — and Wall Street thinks the chipmaker will live up to high expectations. AMD shares have been on a tear this year as investors cheered the company’s high-profile partnerships with AI giants such as OpenAI and Oracle . Although the stock is up nearly 104% year to date, shares have slumped about 5% since AMD gave fourth-quarter margin guidance that was in line with estimates. Analysts remain bullish on the stock with a consensus price target of $267.02 implying roughly 9% potential upside ahead, per LSEG. Of the 55 analysts covering the stock, 28 rate it a buy and 14 give it a strong buy rating. Twelve maintain a hold rating on shares, and one analysts has a sell rating. Analysts continue to expect strong revenue growth from AMD in light of its recent performance. Its data center business — which includes graphics processing units and standard central processing units, or GPUs and CPUs, for AI — reported revenue growth of 22% year over year in its latest quarter. This year’s analyst day could revive investor excitement. Analysts are looking to gain greater visibility into the size of AMD’s total addressable market for AI, its profit and margin expectations, and any new customer partnerships as well as upcoming product releases that could refresh its gaming business. “AMD typically likes to come out swinging at their analyst day events, though it should be noted that their prior 2022 model did not land all that well (with 2025 likely to miss it across all metrics),” said Bernstein analyst Stacy Rasgon, who has a market perform rating on AMD. “However, the company appears to be in a different situation today than they were ~3 years ago; core markets have normalized following the COVID overhang with an ever strengthening competitive position vs Intel, and the AI story (especially given OpenAI’s new participation) feels more real. That being said, expectations are also far higher,” he wrote in a note to clients. Bank of America, which is far more bullish on AMD’s stock trajectory, is optimistic that the company will lift its overall AI TAM outlook and boast greater share of the AI GPU market against competitors. AMD 1Y mountain AMD stock performance over the past year. Take a look at what the Street is saying: Bank of America: Buy rating, $300 price target “In short, we look to hear updates across its key business segments, as well as new longterm (CY29-30E) AI TAM outlook and financial targets,” analyst Vivek Arya said in a Friday note. “Overall, we expect AMD to announce: 1) new AI accelerator TAM of $750-850bn (vs. prior > $500bn by CY28), with the ratio of merchant GPU to ASIC potentially at 75%/25%; 2) AMD’s AI share target of double-digit of the merchant market, or ~$55-65bn GPU sales; 3) overall sales growth target of 25-30% [compound annual growth rate]; 4) GM of 53-55% vs. > 57% prior as the lower-margin GPUs weigh in; 5) but lower [operating expense] intensity at 21-22% as the GPU business gains scale; and 6) overall OpM of low/mid-30% vs. prior mid-30%. Bernstein: Market perform rating, $200 price target “We would expect to hear updates on the AI TAM (at a minimum we expect it to start with a “T” instead of a “B” this time around), as well as share expectations, any new customer engagements/partnerships, and thoughts on gross and operating margin potential as AI dominates growth,” Rasgon wrote in a Monday note. “Beyond these points, we would listen for updates on roadmaps (GPU, server and PC CPUs, gaming, embedded), as well as any new thoughts on capital allocation, including thoughts on further M & A needs, and the possibility of a dividend given cash generation trends.” Jefferies: Buy rating, $300 price target “As a reminder of how far the business has come, the DC TAM laid out in 2022 was $125B with a total company TAM of $300B,” analyst Blayne Curtis said in a Friday note. “For context, AMD’s most recent “Advancing AI” event in June of this year suggested a DC AI Accelerator TAM alone of $500B+ with Inference demand of ~$375B and Training ~$125B by 2028. We expect AMD raises this number again to $1T+. Investors have largely digested the larger AI opportunity, so the bigger potential catalyst rests on whether mgmt offers color on customer set beyond OAI/OCI and the incremental opportunity AI now presents to the Server business.” Wedbush Securities: Outperform rating, $290 price target “While we expect AMD will provide information that will better our understanding of their product roadmap, financial targets and general industry trends; we are less certain that anything we hear will significantly move the needle around forward expectations. … We’d note that perhaps management’s commentary around future [gross margings] for its AI products might be the one piece of insight that impacts our EPS assumptions meaningfully,” analyst Matt Bryson said in a Monday note. He added that “we are most interested in any additional details AMD provides around future expected compute TAM expectations in light of the apparent incremental demand server CPUs have been seeing related to AI.” Cantor Fitzgerald: Overweight rating, $350 price target “AMD remains well-positioned to capture a meaningful piece of the pie with its leverage to Data Center GPU/CPIs, the upcoming launch of rack-scale AI computing solutions, a growing Networking business, and a rapidly accelerating ROCm software stack,” analyst C.J. Muse wrote in a Monday note. “We view this week’s event as a launching point to provide investors with incremental confidence in AMD’s ability to execute across its Data Center full-stack solution roadmap, and supportive of accelerating earnings power through the end of the decade.”
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