Oppenheimer maintained its Perform rating on shares of AMD (NASDAQ:AMD), ahead of the company's expected earnings announcement the week of October 28. The firm adjusted its fourth quarter sales estimate for AMD from $7.7 billion to $7.5 billion, citing more conservative expectations for the PC and gaming sectors. This revision comes despite AMD's recent artificial intelligence (AI) event, which offered limited new information beyond the established roadmap for the MI family of products.
AMD's AI event last week highlighted the scheduled release of the MI325 chip in the fourth quarter of 2024, the MI350 in the second half of 2025, and the MI400 in 2026. The management's efforts have significantly expanded AMD's AI business, growing it to approximately $4 billion in just the past year.
Despite the growth in the AI segment, Oppenheimer believes that the sales targets for the MI3XX family, which are around $10 billion for the year 2025, might be overly ambitious. The firm anticipates stable PC sales, a return to growth in embedded systems, and a greater than 25% increase in server CPU sales by the calendar year 2025. Nevertheless, Oppenheimer remains cautious, citing persistently high expectations for AMD's data center AI performance as the reason for its neutral stance on the stock.
Advanced Micro Devices (NASDAQ:AMD) has launched the Alveo UL3422 accelerator card, designed to provide ultra-low latency trade execution for high-frequency trading applications. The company's Q2 revenues surpassed Street consensus, reaching $5.835 billion, with record revenue growth of 115% in its data center segment.
Analyst firms such as Barclays, KeyBanc Capital Markets, and TD Cowen have maintained positive ratings on AMD shares, citing the company's recent AI advancements and new product launches. Additionally, AMD has announced a strategic collaboration with Oracle (NYSE:ORCL) Cloud Infrastructure, strengthening its footprint in the cloud computing sector.
InvestingPro Insights
To complement Oppenheimer's analysis, InvestingPro data offers additional insights into AMD's financial position. Despite the cautious outlook on PC and gaming sectors, AMD's revenue growth remains positive, with a 6.4% increase over the last twelve months as of Q2 2024. The company's gross profit margin stands at a healthy 51.42%, indicating strong pricing power in its product lines.
InvestingPro Tips highlight that AMD is a "Prominent player in the Semiconductors & Semiconductor Equipment industry" and has shown a "High return over the last year," with a one-year price total return of 57.27%. This aligns with the company's growing presence in the AI market, as mentioned in the article.
However, investors should note that AMD is "Trading at a high earnings multiple," with a P/E ratio of 197.49. This high valuation suggests that market expectations for AMD's future performance, particularly in the AI segment, are indeed elevated, supporting Oppenheimer's cautious stance.
For readers seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for AMD, providing a deeper understanding of the company's financial health and market position.
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