The growing adoption of artificial intelligence (AI) has created a boon for a number of companies in the semiconductor sector Advanced micro devices (NASDAQ: AMD) was among the beneficiaries of this trend. The company’s processors have seen strong demand, driven by these long-term tailwinds.
Despite spectacular gains of 78% over the past year, one Wall Street analyst believes AMD needs to go one step further.
Taking advantage of the AI ​​boom
Evercore ISI analyst Mark Lipacis initiated coverage on AMD stock with an outperform (buy) rating while assigning a $200 price target to the stock. That represents a potential upside for investors of 25% compared to the stock’s closing price on Monday. The analyst suggested that AMD will be the beneficiary of “the tectonic shift in the computer age to the parallel processing age” as it takes a growing market share of the central processing units (CPUs) used in data centers.
The analyst further says that AMD has proven itself as a suitable alternative to Nvidia‘s AI-centric graphics processing units (GPUs), with AMD recently unveiling its Mi300 series AI accelerators, platforms and data center accelerated processing units (APUs).
The analyst may be on to something. The rapid shift in demand for generative AI has led to a shortage of high-performance processors needed to run AI – and AMD is well positioned to exploit that shortage. Moreover, while Intel has long been one of the leaders in the data center CPU market, AMD has been gaining market share at the expense of its long-time rival. To make matters worse, AMD also increased its share of desktop CPUs for the first time in more than two years.
To be clear, the results of AMD’s moves are only starting to show in its financial results, as fourth-quarter revenue grew 10% year over year. However, if the company can capitalize on the rising demand for AI-centric processors, the future could be bright indeed.
The stock isn’t exactly cheap at eight times sales, but if AMD continues to gain market share, it could end up being a bargain.
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Danny Vena has positions at Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 relying on Intel and short May 2024 $47 relying on Intel. The Motley Fool has a disclosure policy.
Shares of Advanced Micro Devices are up 25%, according to a Wall Street analyst, originally published by The Motley Fool
