In a recent interview with CNBC, Wedbush Securities’ senior vice president, Matt Bryson, talked about the recent pullback in the semiconductor sector, which in turn caused semiconductor stocks to take a hit.
The good news is, he said that he expected companies in the sector to quickly recover soon. One such company is AMD (NASDAQ: AMD). AMD stock is down 12.79% over the past month, but according to analysts, everything could change once the company reports earnings on April 30th.
TD Cowen’s AMD Stock Forecast
When it comes to AMD’s upcoming Q1 earnings report on April 30th, TD Cowen analyst, Matt Ramsay, has a reassuring message for investors. In fact, he believes that AMD will deliver an “easily good enough” earnings report, despite some concerns about the chipmaker meeting expectations. Ramsay is confident that AMD will post results solid enough to maintain investor confidence, and he even set a bullish price target of $200 on AMD stock, which is approximately a 27% upside from where the stock is trading now.
According to Ramsay, AMD’s newly launched MI300X AI chip is poised to be a massive revenue driver for the company. In fact, he believes that the chip will see the fastest ramp up in sales of any AMD product in history. Additionally, Ramsay said that the MI300X is “generally on track” for rollout to major customers like Microsoft (NASDAQ: MSFT), Oracle (NYSE: ORCL), and Meta (NASDAQ: META). The early customer response to the AI chip has been very positive, with Microsoft already using it to more efficiently serve its Azure cloud service and power OpenAI’s GPT-4 large language model.
He also thinks that AMD’s $3.5 billion guidance for MI300X revenue this year is too conservative, saying that it could easily be exceeded, with $4 billion to $4.5 billion or more in mind. Looking ahead, Ramsay sees MI300X sales accelerating rapidly to $8 billion or $9 billion by 2025 as demand takes off, and as more and more customers start lining up, sales could surge to $15 billion in 2026 and $20 billion in 2027. This is just one AMD product line, and by combining these expectations with revenues from AMD’s other segments like data centers, PCs, and gaming chips, it becomes obvious that AMD’s business has the potential to skyrocket to new heights.
Short-term Volatility Doesn’t Matter
Ramsay isn’t at all worried about AMD stock, suggesting that investors seem to be following the crowd when it comes to AMD, and criticizing the “herd mentality” of near-term sentiment. He even wrote that sentiment, up or down, has changed a lot more than fundamentals for AMD this quarter. In other words, the stock’s near-term volatility doesn’t actually matter to him, and he also thinks that bearish expectations on the company’s new AI chip are overblown, because its ability to serve as a strong alternative to Nvidia’s (NASDAQ: NVDA) H100 didn’t change with the stock’s fluctuations.
Ramsay believes that the MI300X chip will exceed all expectations and cement AMD’s leadership in the critical AI compute market for years to come. Not only that, but his bullish forecasts show that shareholders can look forward to substantial gains as this AI chip disrupts the industry.
Mizuho’s AMD Stock Forecast
It’s not just TD Cowen who’s bullish on AMD stock because of the company’s AI prospects. In fact, the Japanese bank, Mizuho, is also betting big on AMD stock. During the semiconductor sector pullback, Mizuho Bank analyst, Jordan Klein, said that AMD stock is currently in “absolute freefall,” adding that few investors are “willing to step up and buy on fears of catching a falling knife” ahead of earnings.
Klein is concerned that the company would give mixed commentary on its MI300X chip or fail to raise its outlook for its revenue, agreeing with Ramsay on the fact that it should be more than $3.5 billion. Despite this, Klein believes that AMD’s upcoming earrings could turn things around, not just for AMD, but for the entire beaten-down semiconductor sector in the second quarter. When it comes to AMD, Klein thinks that whatever CEO Lisa Su and her team say about the outlook for the company’s AI chips in the earnings call is beyond critical to support AMD stock and bring any potential buyers back.
As for the semiconductor market, Klein added that AMD has the potential to drive sector sentiment significantly, for better or for worse. This is because semiconductor stocks could react to AMD results and progress, and if AMD’s results are great and management reassures investors of the high demand for AI chips, the sector might bounce back. On the other hand, Klein thinks that if AMD disappoints, the sector might go down very quickly. Despite this, he said he’s still an AMD bull and is a huge fan of their amazing work progress.
AMD VS. Nvidia
While analysts believe that the MI300X will be an absolute game-changer for AMD, it still faces some competition, especially from Nvidia. But AMD isn’t going down without a fight, and is especially targeting Nvidia’s CUDA platform. In fact, AMD is investing heavily in developing a drop-in CUDA replacement, which will allow seamless execution of CUDA-enabled software on AMD hardware. This open source approach aims to break down barriers and allow AMD and Nvidia GPUs to operate together in the same systems.
On top of this, AMD has also partnered with companies like Google (NASDAQ: GOOG) and Intel (NASDAQ: INTC), to create competitive hardware solutions, which will definitely help it take some market share from its main competitor, Nvidia.
What’s Next for AMD Stock?
There’s a lot to be excited about when it comes to AMD. With its upcoming products, the long-term growth story appears strong, and since the stock is currently trading at around $157, a downside of around 34.3% from this year’s peak of $211, there’s a clear buying opportunity for investors who believe in AMD’s future prospects.
There’s a strong need for more AI chips, as the global generative AI market is expected to be worth around $255 billion by 2033. Therefore, companies will definitely continue needing AI chips in the future, especially generative AI chips. Even in the short-term, consulting firm Deloitte expects that the market for generative AI chips will be over $50 billion by the end of 2024, and this is a huge change in a very short time, considering that the market size was close to zero in 2022. Deloitte also expects that generative AI chips will make up two thirds of all AI chip sales in 2024, and that AI chips sales will account for 11% of the $576 billion global chip market. This is a massive and growing market, so even if Nvidia dominates the majority of it, there’s still an opportunity for other players like AMD, and the company’s expertise in AI chips makes them more competitive as AI becomes pervasive.
AMD’s AI investments will continue to solidify its position in the market, and allow it to generate new revenue opportunities, design more advanced chips, and build partnerships and collaborate on projects for heterogeneous computing solutions for AI. Aside from the MI300X, AMD has more launches planned for this year, including the Ryzen Pro 8000 series processors and the new Ryzen 9000 Zen 5 Processors.
This is one of the reasons why Wall Street analysts continue to be bullish on AMD, as 29 out of 48 analysts covering the stock have a “Strong Buy” rating on the stock. Meanwhile, the average price target these analysts set is $197, which is around a 25.17% upside from where the stock is currently trading. Right now, there are still lots of questions to be answered in the company’s upcoming earnings call, especially when it comes to the expectations for AMD’s AI chips. But one thing’s for sure, AMD stock could see a boost as the company continues to innovate.
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