AMD Stock Forecast: In the past few months, Advanced Micro Devices (NASDAQ: AMD) shares have experienced a significant surge after unveiling its inaugural product tailored for generative AI end-users. With an impressive gain of over 80%, the upward momentum in AMD stock might persist, fueled by upcoming potent catalysts.
The introduction of AMD's MI300 processor is expected to enhance the company's overall performance. The introduction of these supplementary hardware products holds the potential for even more substantial growth, paving the way for another robust upswing for this already successful AI stock.
AMD Stock: Why MI300 Launch Justifies the Initial Surge
Skeptics of Advanced Micro Devices' AI surge argue that the rapid ascent of AMD stock has been excessive. According to their perspective, the recent rally and the stock's impressive 157.5% year-over-year increase already reflect the AI catalyst, making the current valuation too high.
Contrary to this viewpoint, I maintain a different stance. I believe that the current valuation of AMD stock doesn't fully account for the potential impact of the ongoing growth trend. Present prices might only marginally encompass the likely upside stemming from MI300, both in the immediate future and in the years ahead.
While the company has projected MI300 processor sales to reach $3.5 billion this year, some argue that this estimate is conservative. Citigroup analysts, for example, suggest that MI300 sales could reach $5 billion in 2024, with a further increase to $8 billion by 2025.
Moreover, beyond the MI300, there is the prospect of generating billions more in the next year from the sale of additional AI chip products, as alluded to earlier.
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Big Opportunity for This Second Mover
Nvidia (NASDAQ: NVDA), currently holding an “A” rating in Portfolio Grader, stands as the foremost pioneer among AI chip stocks, boasting an 80% share in the high-end AI chip market. Despite its dominance, the good news for AMD stock investors is that even as a “second mover,” AMD can thrive in this competitive landscape.
A recent Wall Street Journal article highlights a significant opportunity for “second movers” to gain market share, particularly as AI chip sales shift from training artificial intelligence models to inference, or the deployment of AI systems. AMD claims superiority over Nvidia in the realm of inference with its AI chips.
Moreover, Advanced Micro Devices is strategically targeting the emerging AI-PC market, aiming to capture a substantial share. With 54.5 million AI-capable PCs set to ship this year, a figure expected to rise to 167 million by 2027, AMD sees substantial growth potential. Additionally, a burgeoning market for AI-compatible chips in mobile devices further adds to the considerable opportunities for AMD in these expanding markets.
Still a Top-Shelf Pairing for Full-On AI Exposure
While analysts exercise caution with long-term earnings forecasts for AI chip stocks, the projections for AMD are notably varied for 2025. Estimates range from a low of $3.52 per share to an optimistic high of $9.05 per share, representing a substantial leap from the 2024 consensus of $3.65 per share.
While it might be prudent not to assume earnings will reach the highest estimates, it's essential to acknowledge that AMD has the potential for a significant earnings increase akin to Nvidia's dramatic jump. Given these factors, AMD stock is considered a premium choice for comprehensive AI exposure, aligning well with NVDA stock. Holding existing positions is advisable, and investors may consider entering or adding to their positions.
It's worth noting that AMD stock maintains an “A” rating in Portfolio Grader, further supporting its standing as a favorable investment.