Shares of chipmaker Advanced Micro Devices (AMD) are trading lower at the time of writing, even though Citi Research kept its Buy rating on AMD after a 15% rise in August notebook shipments. However, this increase mostly reflects weak demand in July rather than real market growth and is probably why investors are not very enthusiastic about the Buy rating. It also doesn’t really help that analyst Carrie Liu expects notebook demand to go up by 4% in Q3 2024, which is slightly below the usual 5%.
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Furthermore, another Citi analyst, Christopher Danely, mentioned that talks with Intel (INTC), Dell (DELL), and Western Digital (WDC) suggest that the PC recovery is weaker than expected. Indeed, inventory replenishment appears to be ending and is likely to create a mild near-term headwind for AMD.
However, AMD does have catalysts that should act as tailwinds. AMD is trying to grab a bigger piece of the server chip market, which Nvidia (NVDA) dominates, and since Nvidia’s chips are expensive, some cloud providers like Oracle and AWS are choosing AMD chips for AI work because they’re more affordable.
It’s worth noting that Danely is a 4.3-star analyst who has enjoyed a 57% success rate on his ratings, with an average return of 7.6% per rating.
Is AMD Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMD stock based on 26 Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 35% rally in its share price over the past year, the average AMD price target of $190.25 per share implies 34.6% upside potential.
