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Citi maintains buy rating on AMD stock, sees AI market growth

EditorAhmed Abdulazez Abdulkadir
Published 10/11/2024, 10:24 PM
© REUTERS

© REUTERS

AMD
-4.31%

On Friday, Citi reiterated its positive stance on AMD (NASDAQ:AMD) shares, maintaining a Buy rating with a $210.00 price target. The affirmation follows AMD's recent Advancing AI event where the company updated its Artificial Intelligence Total Addressable Market (AI TAM) forecast, projecting it to surpass $500 billion by 2028. AMD also unveiled details about its new MI325X AI chip during the event.

AMD's AI TAM estimate has seen a significant increase, and the company now expects the market to grow substantially within the next six years. The new MI325X AI chip is part of AMD's strategy to capture a larger share of this expanding market. Despite the prediction that Nvidia (NASDAQ:NVDA) will retain a dominant 90% share of the AI GPU market, AMD is recognized for its competitive advantages which include offering more memory, lower prices, and an open ecosystem.

Citi anticipates that AMD will adjust its AI GPU revenue forecast upwards from over $4.5 billion to beyond $5.0 billion during its third-quarter 2024 earnings announcement. This forecast revision is expected as AMD aims to capitalize on the growing AI market and leverage its product strengths.

The price target set by Citi reflects confidence in AMD's market position and its potential for growth in the AI sector. The firm's analysis suggests that AMD's strategic moves and product offerings could enable it to secure a more significant market presence in the AI GPU space.

AMD's stock continues to be viewed favorably by Citi, with the financial institution seeing the company's advancements in AI as a key driver for future growth. The maintained Buy rating and $210.00 price target underscore Citi's belief in AMD's strategy and its prospects in the burgeoning AI market.

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In other recent news, Advanced Micro Devices (NASDAQ:AMD) has made significant strides in enhancing artificial intelligence (AI) infrastructure performance and server capabilities. The company recently launched its 5th Gen AMD EPYC server CPUs, which boast a 17% increase in instructions per cycle and up to 192 cores for cloud workloads. Furthermore, AMD has introduced its AMD Instinct MI325X accelerators and third-generation Ryzen AI PRO 300 Series mobile processors, all aimed at boosting AI performance.

In the realm of AI networking, AMD unveiled the AMD Pensando Salina DPU and Pollara 400 NIC (NASDAQ:EGOV), which are expected to be available in the first half of 2025. These networking components are designed to optimize front-end network clusters and enhance back-end network performance.

AMD's Q2 revenues surpassed Street consensus, reaching $5.835 billion, with its data center segment showing record revenue growth of 115% to $2.8 billion. Analysts from Cantor Fitzgerald and Goldman Sachs maintained positive ratings on AMD, reflecting confidence in the company's strategic initiatives and market position.

InvestingPro Insights

Adding to Citi's bullish outlook on AMD, recent data from InvestingPro provides further context to the company's financial position and market performance. AMD's market capitalization stands at an impressive $265.72 billion, reflecting its significant presence in the semiconductor industry. The company's revenue for the last twelve months as of Q2 2024 reached $23.28 billion, with a notable revenue growth of 6.4% over the same period.

InvestingPro Tips highlight AMD's strong market position, noting it as a "Prominent player in the Semiconductors & Semiconductor Equipment industry." This aligns with the company's ambitious AI initiatives and Citi's positive outlook. Additionally, AMD has shown a "High return over the last year," with a one-year price total return of 51.58% as of the latest data, underscoring investor confidence in the company's strategic direction.

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It's worth noting that AMD is "Trading at a high earnings multiple," with a P/E ratio of 195.92. This high valuation could be attributed to investor expectations of future growth, particularly in the AI sector, as discussed in the article. For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for AMD, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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