AMD Positioned for Success in AI Revolution

Shares of Advanced Micro Devices Inc. (AMD) experienced a temporary dip after its recent earnings announcement, prompting questions about the company’s artificial intelligence (AI) timeline. However, industry analysts suggest that AMD might be better poised to leverage the potential of AI than what is currently being acknowledged.

Benchmark analyst Cody Acree, known for his optimistic outlook, maintains a buy rating and sets a fresh price target of $145 for AMD. In a recent note, Acree asserts that AMD is “among the best positioned companies to benefit from the tech sector’s broad macro-economic adoption of AI.”

Highlighting their commitment to innovation and expansion, AMD recently unveiled two additions to their highly regarded Radeon line of graphics cards. The Pro W7600 and Pro W7500 workstation GPUs are specifically designed to accelerate workloads in sectors such as media, entertainment, and design.

While some analysts express concerns about high expectations for AMD following its latest earnings report, comparisons are inevitable. Nvidia Corp., seen as the primary hardware beneficiary of the AI boom, is set to release its earnings and unveil new AI data center products on August 23.

Following a decline of 7% in the wake of its earnings announcement, AMD shares are showing signs of recovery with a 3% gain in Thursday’s trading session.

The Semiconductor Industry’s Outlook and AMD’s Growth Forecast

According to industry analysts, the semiconductor industry’s cyclic correction is believed to have reached its lowest point. The excess inventory of components and finished goods in the PC/laptop and server markets has largely been corrected during the first half of this year. As a result, analysts expect an optimistic trend in Street earnings forecasts for the remainder of this earnings season.

AMD, a prominent player in the chip industry, is also anticipating growth in its data center and client segments at a double-digit pace. This growth is expected to offset the declines in its gaming and embedded segments. To further solidify its position, AMD is set to release two new products later this year – the Pro W7600 with 64 AI accelerators priced at $599, and the Pro W7500 with 56 AI accelerators listed at $429. Both of these products run on AMD’s advanced RDNA 3 chip architecture.

FactSet conducted a survey among 45 analysts, revealing that 30 of them have buy-grade ratings for AMD shares, while 15 have hold ratings. The average target price for AMD shares is reported to be $140.52.

As for the performance of AMD shares, they have seen an impressive 76% increase year to date, outperforming the PHLX Semiconductor Index SOX (+46%), the S&P 500 SPX (+17%), and the tech-heavy Nasdaq Composite Index COMP (+46%). In comparison, Nvidia shares – another key player in the semiconductor industry – have increased by a substantial 205% this year.

In summary, analysts predict a positive outlook for the semiconductor industry, particularly for AMD, as it experiences growth in its data center and client segments. With the upcoming releases of its Pro W7600 and Pro W7500 products, which incorporate advanced AI accelerators, AMD is poised to capitalize on this anticipated upswing.

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