Edward Jones has initiated coverage of AMD (NASDAQ:AMD) with a Buy rating and added the semiconductor giant to its Stock Focus List in a note to clients this week.
The firm told investors that it sees several catalysts that could drive outsized growth for AMD in the coming years.
One of the primary drivers behind Edward Jones' bullish outlook is the growing demand for data center infrastructure, which is expected to boost sales of AMD's graphics processing units (GPUs) and central processing units (CPUs).
The firm's analysts note that "growing demand for data center infrastructure should help drive accelerating sales" of these key products.
Another factor contributing to Edward Jones' optimism is AMD's acquisition of Xilinx.
"While the acquisition of Xilinx adds new programmable chip products and end-markets to AMD's business, we believe the company remains in the early innings of cross-selling and integrating Xilinx and AMD products," writes the firm.
The integration of Xilinx’s programmable chip products with AMD’s existing offerings is still in the early stages, but the potential for cross-selling between the two companies is expected to be substantial.
According to Edward Jones, management estimates that this opportunity could be worth as much as $10 billion, highlighting the strategic value of the acquisition.
Additionally, Edward Jones points to the potential for a longer upgrade cycle in the PC market driven by AI-enabled PCs, which could further support AMD's growth.
The firm believes that while the PC market has begun to rebound, "AI-enabled PCs could drive a longer upgrade cycle," leading to sustained growth in this segment.
Edward Jones concludes that this positive outlook for AMD is "not fully reflected in the share price," making it an attractive investment opportunity at current levels.