April has been a volatile month for AMD stock for a variety of different reasons that include an uncertain economic outlook that dragged down the entire semiconductor chips sector. In particular, AMD stock is down by 5.24% over the past month.
Then, AMD (NASDAQ: AMD) reported its 2024 Q1 earnings, and even though the company managed to beat Wall Street’s estimates and raise the full year’s guidance, the stock still dipped as the company’s Q2 guidance disappointed investors. However, bucking the recent volatility, AMD stock found an upbeat advocate as DZ Bank lifted its rating to “Buy” from “Hold”. Moreover, the German bank set a $190 price target, seeing an opportunity for a 25% upside from where the stock is trading currently.
More Analysts Betting on AMD Stock
It’s not just DZ Bank analysts that is taking AMD’s side now. In fact, analysts at Melius Research said that while Nvidia (NASDAQ: NVDA) is the dominant provider of chips to train AI systems and that’s not likely to change any time soon, AMD could greatly benefit from the shift from training toward inference, which is the process of generating answers or results from AI models.
Melius Research analyst Ben Reitzes also said that the increased capex at the big cloud companies should benefit AMD as well, as Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) place orders for inferencing workloads in particular. In response to the dip AMD stock saw after earnings, Reitzes argued that any caution looked to be down to capacity constraints which will be alleviated in the second half of the year, as opposed to a lack of demand. Notably, he has a buy rating on AMD stock, while his target price of $210 for AMD indicates a possible gain of 38%.
Also, analysts at Citi, who recently maintained their Buy rating on AMD stock, said that AMD, as well as Arm, have both gained market share over Intel (NASDAQ: INTC) in the first quarter, and according to that data, AMD’s overall market share for MPUs grew by 20 basis points quarter-over-quarter, rising from 18.4% in the Q4 2023 to 18.6% in the Q1 2024, driven by gains in server and desktop CPU shares.
AMD CEO Lisa Su expressed optimism about the company’s opportunities in artificial intelligence in the company’s Q1 earnings call, and this is one of the main reasons why analysts are bullish on AMD. Overall, AMD delivered solid first quarter results and saw robust growth in key business segments like data centers and appeared well positioned to capitalize on growing AI compute workloads.
AMD’s MI300X Chips
Although AMD stock has seen some turbulence and volatility in recent months amid broader market swings, the company has delivered strong returns of over 50% in the last year, significantly outpacing the wider semiconductor sector. There’s also strong demand for the company’s new chips, and they actually have the potential to compete with Nvidia’s flagship H100, as demonstrated by the two companies’ customers.
In fact, during the latest conference call with investors, CEO Lisa Su said more than 100 enterprise and AI customers were already deploying AMD’s MI300X, including some of Nvidia’s most prized customers like Microsoft, Meta Platforms, and Oracle (NYSE: ORCL). She also said many MI300X customers were seeing superior performance compared to their H100 installations, and although Nvidia is already preparing to launch its new, more advanced Blackwell GPUs, this is a great starting point for AMD to build upon.
AMD stock dropping so much after the company reported earnings was a massive overreaction from investors. Even if Q2 guidance was disappointing, AMD still demonstrated excellence in a couple of key areas. For instance, the company’s Q1 Data Center segment revenue grew 80% year over year to $2.3 billion, while its client segment revenue increased 85% year over year to $1.4 billion. While AMD is chasing Nvidia in the data center sector, it appears to have an early lead in AI’s next frontier. This is because AMD’s Ryzen AI chips are the top choice for leading desktop and notebook manufacturers like Asus, Acer, Dell (NYSE: DELL), and HP (NYSE: HPQ).
In fact, in the previous quarter, AMD told investors that it had a market share of around 90% in this segment, with millions of computers having already shipped with Ryzen AI chips. Therefore, with game-changing chip designs challenging industry leaders and taking market share, AMD’s future looks bright. Additionally, they are also aggressively expanding into high-growth segments like data centers and AI PCs. Certainly, competition remains fierce and global headwinds could impact growth. However, AMD has proven resilient and adaptable over decades of battling tech giants.
The Bottom Line
You should really think for yourself and stay calm when AMD stock wobbles and wavers sometimes. After all, AMD is still a solid AI-hardware business that’s growing rapidly in key areas. Also, competition from other companies in the market, like Nvidia and Intel, is actually a good thing because it drives fierce innovation from all market players, and while Nvidia currently maintains advantage, AMD’s savvy strategies and engineering ethos make them a formidable contender in the AI chip race going forward.
Therefore, for investors with patience and an appetite for risk, AMD remains a compelling bet on the future of computing. The coming years will surely hold great surprises, successes and stumbles along AMD’s journey. However, one thing is certain — this determined company has the potential to become a much larger company in the future.
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