When it comes to choosing AI chip names, Advanced Micro Devices (NASDAQ:AMD) stock isn’t often the first pick that comes to mind. Most investor attention is rightly focused on Nvidia (NASDAQ:NVDA), given the company’s position as the leading semiconductor stock in the high-performance computing space.
AMD isn’t lagging too far from Nvidia in this space. I think the company still holds competitive upside, relative to other competitors in this space such as Intel (NASDAQ:INTC) and Qualcomm (NASDAQ:QCOM).
According to AMD’s CEO Lisa Su, the company is more focused on AI now. In fact, AMD just revealed their Ryzen AI 300 series and their next-gen AI laptops.
AMD didn’t match Nvidia’s rally, which surged 154% this year, while AMD only appreciated 17%. The market is clearly underestimating AMD’s AI chip potential, leading to potential upside if AI computing trends are as bullish as many think.
With a relatively attractive multiple, AMD stock could be poised for further upside from here. Let’s dive more into why this may be the case.
Silo on Board
AMD shares rose nearly 4% after announcing the $665 million acquisition of Europe’s largest private AI lab, Silo AI, to enhance its AI market presence. This move aligns with AMD’s strategy to provide end-to-end AI solutions. In the past year, AMD has invested $125 million in AI-related companies and acquired Mipsology and Nod.AI.
AMD stated that Silo AI’s team has vast experience in creating customized AI models for various markets. Silo AI will join AMD’s Artificial Intelligence Group, led by its co-founder Peter Sarlin. AMD’s Senior VP, Vamsi Boppana, noted that this acquisition will boost their AI strategy and the development of AI solutions. The deal is set to close by year-end.
Wells Fargo Raised Price Target
Advanced Micro Devices saw its price target raised by Wells Fargo (NYSE:WFC) analyst Aaron Rakers from $190 to $205 per share. This represents an 11.4% potential increase over the prior closing price and surpasses the analysts’ consensus of $190.50.
Rakers maintained an overweight rating for AMD stock, compared to the consensus rating of a moderate buy from 30 analysts.
AMD’s price target was raised following its acquisition of Silo AI. Wells Fargo’s analyst noted this move enhances AMD’s AI capabilities, complementing previous acquisitions. Despite a slight drop Thursday morning, AMD stock is up 31.6% year-to-date.
Optimism for AMD Stock
Advanced Micro Devices, once seen as an underdog in AI, is gaining market optimism ahead of its upcoming earnings report on July 30. The stock rose 12% over the past week and 15% over the month, outperforming Nvidia. Year-to-date, Nvidia surged 167%, while AMD increased by 24%.
AMD’s recent stock surge is partly because of positive analyst notes on its current and upcoming “Turin” processors. Piper Sandler’s Harsh Kumar labeled AMD his top large-cap semiconductor pick for the year’s second half.
Melius Research’s Ben Reitzes also named AMD a top “catch up” trade, predicting 14% more gains. Reitzes reiterated his buy rating, citing PC market growth and manageable sales expectations as factors driving the stock’s rise.
Money managers expect AMD’s MI300 AI processor sales at $5.5 billion in 2024, down from $7 billion. AMD shares rose 13% since Barron’s recommendation. BofA Securities reports 39.3% ownership among fund managers.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
