AMD: Upgrading To Buy In Hopes Of An A.I. Boom Possibility

In this article, we will discuss the reasons behind the upgrade of Advanced Micro Devices, Inc. (AMD) to a BUY rating in the hopes of an AI boom possibility.

We will explore the impact of near-term muted cloud/enterprise capex spending and the industry pivot to A.I. servers on AMD’s data center financial performance and share gains against Intel.

Additionally, we will delve into AMD’s A.I. accelerator offerings and how they compare to Nvidia Corporation’s, along with the potential for AMD to capitalize on the current supply shortage facing Nvidia.

We’ll also touch upon the company’s financial performance, valuation, and Wall Street sentiments.

1. Near-term Muted Cloud/Enterprise Capex Spending & Industry Pivot to A.I. Servers

The shift towards A.I. servers and the muted cloud/enterprise capex spending have had a negative impact on AMD’s data center financial performance. As cloud customers increasingly favor A.I. over traditional compute spending, AMD faced challenges in revenue growth in the near term. The company experienced a decline in Data Center sales, indicating the impact of the A.I. boom on customer spending patterns.

2. Moderating Share Gains Against INTC

AMD’s impressive share gains against Intel in the PC and data center markets in 2022 have moderated in FY23. The company reported a drop in Client revenue and faced competition from Intel’s rebound in the PC market. In the data center market, AMD’s share gain against Intel also stalled, highlighting the fierce competition in the A.I. accelerator market.

3. Design Wins in 2023 A.I. Chips Race

While AMD’s A.I. accelerator offerings may lag behind Nvidia’s current generation products, the limited supply of Nvidia’s products provides AMD with a unique opportunity. The upcoming release of AMD’s MI300x, which is experiencing strong engagement, adds to the company’s potential in the A.I. accelerator market. The severe supply shortage faced by Nvidia further enhances AMD’s position in the A.I. boom possibility.

4. Valuation

AMD is trading at relatively expensive multiples due to the A.I. sentiment. However, the recent earnings pullback offers attractive entry points for investors looking to buy the stock at lower levels.

5. Word on Wall Street

Wall Street is bullish on AMD, with a majority of analysts giving it a buy rating. The stock has a significant potential upside, with the median sell-side price target at $143 and the mean at $137.

Conclusion

Considering the factors discussed, including the potential for A.I.-related revenue growth, the supply shortage of Nvidia’s products, and positive sentiments on Wall Street, Advanced Micro Devices, Inc. presents an exciting opportunity for investors. The upgrade to a BUY rating reflects the belief in AMD’s ability to capitalize on the A.I. boom and navigate the competitive landscape.

FAQs

1. How does the A.I. boom affect AMD’s financial performance? The A.I. boom has resulted in cloud customers favoring A.I. accelerators over traditional compute spending, impacting AMD’s data center financial performance. However, the current supply shortage of Nvidia’s products presents an opportunity for AMD to grow in the A.I. accelerator market.

2. What is the outlook for AMD’s A.I. accelerator offerings? While AMD’s A.I. accelerator offerings may lag behind Nvidia’s current generation products, the upcoming release of MI300x shows promise and strong engagement, positioning AMD favorably in the A.I. chips race.

3. How does AMD’s share gain against Intel look for the future? AMD’s share gains against Intel have moderated in 2023, indicating stiff competition in the PC and data center markets. However, AMD’s performance is expected to improve in the second half of the year, and entry points into the stock post-earnings pullback are recommended.

4. Is AMD’s stock valuation attractive for investors? AMD is trading at relatively expensive multiples due to the A.I. sentiment. However, the recent earnings pullback provides an attractive opportunity for investors to buy the stock at lower levels.

5. What is Wall Street’s sentiment towards AMD? Wall Street is bullish on AMD, with a majority of analysts giving it a buy rating. The stock has a significant potential upside, making it an enticing option for investors.