Given the current buzz around AI, one might expect Advanced Micro Devices (NASDAQ:AMD) to reap the rewards. However, this hasn’t been the case recently. After reaching a peak in early March, AMD shares have shed 35% of their value and have now tilted into the red on a year-to-date basis.
Stifel analyst Ruben Roy, who is ranked in the top 3% of Wall Street stock experts, attributes the recent decline in AMD’s stock to “mixed investor sentiment.” This sentiment stems from varying expectations regarding AMD’s MI-series GPUs for 2025 and lingering concerns about the company’s position in the AI-compute sector. Roy notes that Nvidia’s dominance in the high-end market and the increasing focus on “custom AI compute solutions” for smaller language models and inference applications contribute to these concerns.
Nevertheless, Roy remains “positive on longer-term trends” and lays out the bull case for the chip giant.
“We continue to believe that AMD has established itself as a strong Number Two supplier of GPU-based AI compute and we expect continued progress as the company expands its AI technology footprint,” the 5-star analyst said. “With silicon roadmap questions largely answered at the early June Computex, AMD has since embellished its software initiative with an early July acquisition of Silo AI.”
Looking ahead to the Q2 readout (next Tuesday, July 30), Roy expects “in-line to slightly above” results vs. the revenue consensus estimate of $5.72 billion and the company’s guide, which at the midpoint has sales hitting $5.7 billion (up 6.4% year-over-year and amounting to a 4.1% sequential increase).
As CSPs continue to bring AMD-based VMs online, Roy expects commentary on the MI300X to “remain positive.” On the Embedded side of the business, while AMD’s outlook called for Q2 Embedded revenue to stay flat, Roy thinks orders began to “re-accelerate in May with continued improvement in June.” According to the analyst’s checks, these “bode well for 3Q Embedded segment guidance.”
On valuation, AMD shares are currently trading at 29 times Roy’s 2025 EPS estimates and 28 times consensus estimates. Given AMD’s position as the second-largest player in the “rapidly growing AI infrastructure compute market,” Roy considers such a valuation as attractive.
“We believe that AMD has established a compelling product roadmap and we view the company’s move to an annual cadence positively relative to maintaining positioning in the developing AI market,” the analyst summed up.
All told, Roy rates AMD shares a Buy, along with a $200 price target. The implication for investors? Upside of ~45% from current levels. (To watch Roy’s track record, click here)
28 other analysts join Roy in the bull camp and the addition of 6 Holds can’t detract from a Strong Buy consensus rating. Going by the $194.70 average price target, a year from now, shares will be changing hands for a ~41% premium. (See AMD stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
