Advanced Micro Devices stock has 25% upside, according to one Wall Street analyst.
The $200 price target may seem ambitious, but AMD has a clear path forward.
The growing adoption of artificial intelligence (AI) has benefited numerous companies in the semiconductor sector. advanced micro devices (AMD 1.96%) was one of the beneficiaries of this trend. The company’s processors saw strong demand due to these secular tailwinds.
Despite a stellar 78% rise over the past year, one Wall Street analyst believes AMD has more growth ahead of it.
Profiting from the AI boom
Evercore ISI analyst Mark Lipacis initiated coverage of AMD stock with an Outperform (Buy) rating while assigning a $200 price target to the stock. This represents a potential upside for investors of 25% compared to the stock’s closing price on Monday. The analyst suggested that AMD will be a beneficiary of the “structural shift toward the era of parallel processing in computing” as its market share of central processing units (CPUs) used in data centers increases.
The analyst goes on to say that AMD has positioned itself as a suitable alternative. nvidiaof AI-centric graphics processing units (GPUs) and AMD recently unveiled the Mi300 series of AI accelerators, platforms, and data center accelerated processing units (APUs).
Maybe the analyst is on to something. The rapid shift in demand for generative AI has created a shortage of the advanced processors needed to run AI, and AMD is well-positioned to capitalize on this shortage. Moreover, while intel AMD, which has long been one of the leaders in the data center CPU market, has been gaining market share at the expense of its longtime competitors. To make matters worse, AMD also increased its desktop CPU share for the first time in over two years.
To be clear, the results of AMD’s moves are just starting to show in its financial results, with fourth-quarter sales up 10% year-over-year. But if the company can capitalize on the surge in demand for AI-focused processors, the future could be bright indeed.
The stock isn’t exactly cheap at 8x forward sales, but if AMD continues to gain market share, it could end up being a bargain.
Danny Vena holds a position at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: Buy Intel at $45 in January 2025 and sell Intel at $47 in May 2024. The Motley Fool has a disclosure policy.
