Several exciting quarterly reports are on deck this week, with AMD’s (NASDAQ:AMD) standing out as one of the most intriguing. While AI mania has been all the rage in recent times, AMD stock has failed to capitalize on the big trend in 2024. The reason? Many believe that while AMD’s AI chips are strong, they simply don’t measure up to Nvidia’s dominance in the field.
But it would be unwise to write off the semi giant just yet, says Piper Sandler’s Harsh Kumar, a 5-star analyst rated in the top 1% of the Street’s stock pros. In fact, ahead of Tuesday’s earnings, Kumar continues to view AMD “as our top large-cap pick.”
Kumar’s positivity is partly based on AMD’s comments regarding the outlook for its GPUs with the prospect of MI300 adoption setting the scene for “outperformance in the data center segment.”
Many investors have highlighted $5 billion as the annual revenue goal for its GPUs, but looking ahead to the December guide, Kumar thinks that based on the “implied GPU ramp,” AMD will exceed that target.
And into next year, boosted by better rack-level performance, improved supply, and increased adoption of the MI300 and MI325, Kumar expects AMD to hit the next milestone of $10 billion+ in GPU revenues.
The analyst also believes that AMD faced “significant supply constraints” in the first half of the year, along with limited traction as several customers were only beginning to test the MI300. But now, with the MI325 on the way and a “more optimized supply chain,” AMD’s momentum in this area seems to be picking up. As Kumar previously highlighted, with the introduction of the MI325, momentum “appears to be more pervasive” compared to the MI300.
As for the idea AMD is too far behind Nvidia to truly be able to pose a serious challenge to its dominance, Kumar pours cold water on that notion. “All in all,” he summed up, “AMD has taken some significant steps in software/model conversion to eliminate the gap relative to competition. We feel that with the closure of the ZT Systems deal in 1H25, AMD will close another gap to NVDA in rack level performance.”
To this end, Kumar rates AMD shares an Overweight (i.e., Buy), along with a $200 price target, suggesting the stock will gain 26% in the months ahead. (To watch Kumar’s track record, click here)
Overall, most Wall Street analysts back AMD, with 25 out of 31 recent ratings recommending a Buy, resulting in a Strong Buy consensus. The average price target stands at $188.96, implying an ~18% return over the next year. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
