Advanced Micro Devices (NASDAQ:AMD) investors had little to cheer about in 2024. This might seem surprising, given that the semi giant is often seen as a potential challenger to Nvidia in the AI chip segment.
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However, the market appears to have adopted a skeptical stance regarding its ability to make significant inroads. To wit, while AI-focused stocks have been all the rage, AMD shares have shed 10% over the past 12 months.
However, Northland’s Gus Richard, an analyst ranked in the top 2% of Wall Street stock experts, thinks investors are presented with a great opportunity here, with the 5-star analyst viewing AMD as one of his “Top Picks for CY25.”
Richard backs his optimism with several compelling arguments: “We expect AMD to continue to gain share in AI GPUs, server CPUs, and PC clients as headwinds from the embedded and gaming segments abate. AMD is winning share in AI based on its roadmap and TCO. AMD has better products for server and client CPUs. The PC refresh cycle will likely be much stronger than currently expected. We think there is significantly more upside to CY25 than risks.”
Richard is calling for AI revenue of $9.5 billion in CY25, up from $5.2 billion, with the first half of 2025 showing a 7% increase compared to 2H24. As AMD will ramp its MI325X in 1H25, Richard thinks that is a conservative estimate, with the analyst believing it is “competitive with NVDA’s H200.”
However, the main issue remains the software. Here, Richard thinks there’s an ongoing debate about how long CUDA provides Nvidia with a competitive edge. Nvidia’s “lead is significant” due to its extensive software ecosystem, large market share, and early development in GPU computing. Meanwhile, AMD’s open-source ROCm platform is improving but still behind. CUDA’s flexibility allows code to run on both AI server clusters and graphics cards, enabling developers to work across multiple environments (such as on laptops). AMD’s server microarchitecture, CDNA, is separate from its graphics GPU design, limiting developers’ options. However, Richard notes that AMD’s MI300X is widely available in the cloud. While Nvidia dominates in AI training, AMD’s MI300X is competitive in inference, matching Nvidia’s H100 in recent benchmarks.
Elsewhere, Richard anticipates AMD will keep eating away at Intel’s share in PC clients. As Microsoft ends support for Windows 10, which currently runs on about 1.2 billion systems, Richard expects “strong PC demand in 2025.” While overall PC inventory is slightly high, AMD’s inventory “is in good shape.” Richard thinks client revenue in 2025 will reach $7.9 billion, amounting to a 15% year-over-year increase. However, if the replacement cycle goes ahead as expected and AMD maintains its market share, Richard believes client revenue could be $1-2 billion higher than that estimate.
All told, Richard rates AMD shares an Outperform (i.e., Buy), along with a $175 price target. The implication for investors? Upside of ~40% from current levels. (To watch Richard’s track record, click here)
In general, the rest of the Street has an optimistic view of AMD. The stock’s Strong Buy status comes from the 24 Buys and 8 Holds issued over the past three months. Adding to the good news, the upside potential lands at 47% based on the $184.37 average price target. (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.
