A significant driver of the ongoing two-year bull run is the potential of AI to revolutionize entire industries.
While Nvidia (NASDAQ: NVDA) is the biggest beneficiary of this fact thus far — having seen impressive gains of 190.49% year-to-date (YTD), such a rapid rise has led to widespread concerns about the company’s valuation.
In contrast, NVDA’s only real, direct competitor in terms of chipmaking, Advanced Micro Devices (NASDAQ: AMD) has seen comparatively modest gains of 16.09% in the same period.
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Wall Street researcher sees double-digit upside for AMD stock
AMD revealed an impressive range of new products at its ‘Advancing AI 2024’ event on October 10, which spurred a renewed wave of confidence — both among retail investors and equity researchers.
Ahead of the semiconductor business’s Q3 2024 earnings report, scheduled for October 29, analysts from major firms have revised their price targets and ratings — and they see plenty of upside for AMD stock.
The most recent rating was issued on October 28 by Rosenblatt managing director and semiconductor researcher Hans Mosesmann. He maintained a ‘Buy’ rating with a reiterated price target of $250, which would represent a 55.39% increase from AMD’s current price of $160.88
In his note to investors, Mosesmann highlighted that the chipmaker’s underperformance in console sales and its embedded segment will be more than made up by gains in the GPU compute market.
Although AMD’s MI300 product series initially ran into skepticism, Rosenblatt’s data suggests that chiplet/tile GPU yield improvements are better than expected — in contrast, the yields of Nvidia’s Blackwell series appear to be weaker than anticipated.
Per Rosenblatt, even at a conservative forecast that does not rely on AMD offering a superior solution to its main competitor, the company could secure a double-digit share of the GPU compute market.
Finally, Mosesmann expects a slight earnings beat, as well as guidance higher than Street expectations from the company’s Q3 2024 earnings call.
Analyst expectations remain strongly bullish for AMD shares
The optimistic appraisal of AMD’s prospects isn’t confined to Rosenblatt — on October 11, two equity researchers reiterated bullish stances.
Suji Desilva of Roth MKM pointed to the semiconductor titan as an ‘opportunity in a broadly coordinated AI infrastructure push’, citing advances in software as well as the company’s ambitious Instinct GPU roadmap as bullish catalysts. The analyst reiterated a ‘Buy’ rating while maintaining a $200 price target — which would equate to a 24.31% rally.
Cantor Fitzgerald’s C J Muse echoed similar sentiments — noting that ‘AMD does not necessarily need to come close to NVDA’s revenue to drive significant share appreciation.’ The analyst reaffirmed a previous ‘Outperform’ rating, with a price target of $180.
On the whole, the stock is considered a consensus ‘Strong Buy’ per Wall Street experts — with an average price target of $188.46.
NVDA is likely set to secure superior gains in the short term, but Advanced Micro Devices stock remains an attractive value play at its current valuation, allowing investors to gain exposure to returns from AI without exposing themselves to the risk of a pullback.
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Rokas Tenys, New Jersey, United States of America— February 5, 2024. Digital Image. Shutterstock.
