Bullish sentiment has cooled towards Advanced Micro Devices (NASDAQ:AMD) in recent times. While the chip giant is seen as a beneficiary of the AI boom, its growth trajectory has been disappointing for some investors who might have been expecting the company to be making more of the AI opportunity at play.
Despite the recent lackluster price action, investor Insight Analytics believes that “AMD is not a good bargain unless the company returns to its growth path.”
From where might these growth prospects emerge? Well, from several places, as pointed out by InSight.
One area is the data center GPU space, a segment in which Nvidia remains the undisputed king, commanding over 90% of the AI chip market. This dominance is driven by ongoing demand for its best-in-class solutions such as its Hopper infrastructure, coupled with the imminent release of the next-gen Blackwell GPU. However, the focus is now shifting towards monetizing AI through inference rather than solely training proprietary models. This shift presents an opportunity for AMD to increase its market share. Looking ahead, InSight expects inferencing will “grow at a faster rate, which is the area where Nvidia could be challenged.”
Specifically, the MI300X outperforms Hopper in memory-intensive tasks, demonstrating superior inference performance, according to AMD’s benchmarks. Additionally, with rumors suggesting that the MI300X is priced at least 50% lower than Hopper, it potentially offers a significant total cost of ownership (TCO) advantage, particularly important for enterprises focused on cost optimization.
“As a result,” says InSight, “I believe that the landscape is shaping favorably for AMD to gain up to 10% market share of the data center GPU market by 2027 from about 3% at present. With this in mind, the company’s data center segment could grow at a faster pace than the implied 38% CAGR for the market.”
AMD also appears well-positioned to challenge Nvidia in the gaming segment while in the CPU market, with 50 million AI-capable PCs expected to be shipped in 2024, InSight considers this will represent a “solid opportunity for AMD’s growth.”
As such, rather than taking a negative view of AMD’s prospects, InSight thinks “bullish sentiment” should be the order of the day here, with the shares having the “potential to deliver up to a 50% gain as enterprises begin commercializing the AI technology potential.”
Bottom-line, InSight rates AMD stock a Buy. (To watch InSight Analytics’ track record, click here)
That also appears to be the opinion of the majority amongst Wall Street’s analyst community. Based on 30 Buys vs. 6 Holds, the stock claims a Strong Buy consensus rating. At $233.66, the average target makes room for 12-month returns of 46%. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
